End of long-term con­sol­i­da­tion could be in sight

Finweek English Edition - - MARKET PLACE - Ed­i­to­rial@fin­week.co.za

South Africa’s big­gest health in­surer re­cently re­leased its re­sults for the six months to end De­cem­ber, re­port­ing a 14% in­crease in head­line earn­ings to R2.02bn, while new busi­ness grew by 15% to R8.25bn. In the pe­riod, R244m was in­vested in new ini­tia­tives, which in­clude its plans to start a bank in SA, Dis­cov­ery In­sure, the Global Vi­tal­ity Net­work and an in­vest­ment ven­ture in the UK.

Dis­cov­ery said its emerg­ing busi­nesses – Dis­cov­ery In­sure, Ping An Health (its op­er­a­tion in China), and the Vi­tal­ity Group – de­liv­ered growth of 43% in new busi­ness to nearly R1.8bn. “These emerg­ing busi­nesses are now sub­stan­tial, with Dis­cov­ery In­sure cov­er­ing more than 160 000 ve­hi­cles. Ping An Health is the lead­ing health in­surer in China and new busi­ness has grown by 55% over the pe­riod; and Vi­tal­ity Group is a grow­ing global fran­chise that is ac­tive in 12 mar­kets,” it said.

Vi­tal­ity now has more than 1m mem­bers ac­tively us­ing the ben­e­fits in SA, the UK, US, Hong Kong and China. “The ex­cit­ing re­sult is an im­prove­ment in phys­i­cal ac­tiv­ity of over 25%, shown to have sig­nif­i­cant ben­e­fits in hin­der­ing the on­set of dis­ease and im­prov­ing claims ex­pe­ri­ence,” Dis­cov­ery CEO Adrian Gore said.

Af­ter plum­met­ing in Novem­ber 2015 from a high at 15 580c/share to a low at 10 785c/ share, Dis­cov­ery has been con­sol­i­dat­ing, with key sup­port re­tained at 10 785c/share. Cur­rently re­cov­er­ing and test­ing a ma­jor trend­line, fur­ther gains could end the long-term con­sol­i­da­tion and trig­ger a new bull phase. How to trade it: Though Dis­cov­ery has gained up­side, it’s im­por­tant that it es­capes its cur­rent long-term con­sol­i­da­tion, sig­nalled above 13 200c/share. A move above 13 200c/share could see Dis­cov­ery com­plete a 100% re­trace­ment to 15 580c/share. Above that level, the tar­get at 16 315c/ share should be tested. A neu­tral long could be ini­ti­ated above 13 200c/share, with in­cre­men­tal in­creases above 14 430c/share. Main­tain a tight trail­ing stop-loss at first. Fail­ure to re­cover above 13 200c/share would ex­tend the con­sol­i­da­tion, in which case hold – the volatil­ity will be frus­trat­ing.

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