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Discovery sees biggest share price fall since 2009

Discovery, South Africa’s largest medical insurance provider, saw its share price fall further today than it has in more than four years, after saying full-year profit will be up to 10% lower on the year.

The stock slumped by as much as 6.9%, the biggest intraday fall since March 2009, before trading 6% lower at R89.36 per share at 12.36pm in Johannesburg. About 1.5-million shares, or 1.2 times the three-month daily average, were traded. Discovery is the worst performer today on the 165-member FTSE/JSE Africa All-Share Index.

 

Earnings per share at Discovery, 25% owned by investment holding company RMI Holdings, will probably be between the same and 10% lower for the year to June compared with a year earlier, the Johannesburg-based company said. The share traded at 21 times profit and 18 times forecast earnings.

 

“Given where the price-earnings rating of the share was, around 20 times earnings, there wasn’t any room for disappointment in terms of the earnings report,” said Simon Fillmore, chief executive officer of investment firm Independent Securities. “It was priced for perfection and looking very expensive in the short term.”

 

The company started its wellness-based life-insurance model Vitality in Singapore through a joint venture with insurance company AIA Group in July. The stock increased by 44% this year compared with an 8% rise in the benchmark all-share gauge. Cape Town-based RMI's share price fell by 3.9% today to R25.89 per share.

 

“The share price just moved exceptionally strongly over the last couple of months,” Fillmore said. “The trading update was below what the market was expecting.” – Bloomberg

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