Com­bin­ing in­no­va­tion and smart ac­qui­si­tions

Finweek English Edition - - House View Marketplace -

Discovery is a top hold­ing in my port­fo­lio in terms of ex­pec­ta­tions. If the com­pany man­ages to suc­ceed on all fronts, it’s a blend of Capitec* and Naspers**. It’s like Capitec be­cause it is in­no­va­tive in a bor­ing in­dus­try – Discovery started in health but is mov­ing into the fi­nan­cial/in­sur­ance space. Naspers got lucky with Ten­cent, and sim­i­larly Discovery may strike it big with its stake in Ping An Health. The Chi­nese in­sur­ance com­pany is show­ing dou­ble-digit growth, al­beit off a low base, as that coun­try changes its health­care process as it be­comes more of a con­sumer na­tion.

Re­cent re­sults show that the com­pany is mak­ing a de­cent profit. Vi­tal­ity con­tin­ues to ex­pand, as does the over­all of­fer­ing, with its bank­ing di­vi­sion ex­pected to launch in 2018. Discovery con­tin­ues to spend large amounts on in­no­va­tion which, while damp­en­ing earn­ings for now, should pay off in the fu­ture.

As al­ways, there are risks. Health and fi­nan­cial ser­vices are also tightly reg­u­lated (both a ben­e­fit and a chal­lenge) and not easy to break into. But thus far man­age­ment has proven it­self and I am happy to buy be­low R156.

*The writer owns shares in Discovery and Capitec.

**fin­week is a pub­li­ca­tion of Me­dia24, a sub­sidiary of Naspers.

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