Founders shell out big bucks


An interesting couple of announcements from Discovery over the last couple of days, one relates to the directors and related parties with regards to following their rights. First, the quantum of Adrian Gore's share, looking to maintain his shareholding in the company. We were discussing this a little in the office yesterday. The group CEO exercised 4,318,732 rights at 90 Rand, the total amount is a crazy 388,685,880 Rand. Read that again, 388 million Rand to maintain his holding in the company and to not be diluted. Obviously he does not have the money lying around, right?


Discovery rights, get in touch with us


Discovery go ex the rights today, meaning that the company starts trading without the rights. It is simple, on Friday was the last day in order to participate in the rights issue in the ratio of 9.38641 per 100 (at 90 Rand apiece), the share price today will trade accordingly lower, possibly around 6-7 percent lower from where it opens. The shares that you buy today include all the extra ones (55.5 million) that are going to be listed in the coming weeks. Remember, we think that you MUST follow your rights. Apply that ratio above to your current holding of Discovery shares, as per Friday's mini statement, and then multiply it by 90 Rand a share, simply make that deposit.


Discovery rights issue details


The long awaited Discovery Rights issue announcement came yesterday. I suppose not too long awaited, the company only announced this on the 24th of February, for some market types that is too long ago to remember. OK, so give me the lowdown, give me the skinny! Urban dictionary will help you to understand those terms and a whole lot of others that you wished you hadn't looked at.


Rights issue back of the matchbox calcs


Let me flesh out the Discovery rights issue a little. First things first, remember that a company has various options when it comes to raising money, they can turn to the debt markets and borrow money, paying it off over time. They can borrow money from the bank, provided that the bank is willing to lend them such a large sum. The last option is to issue more equity, this is what Discovery are doing. A rights issue is simple, you as the shareholder are given the option to follow all the other shareholders in the same ratio.


Superb numbers


Yesterday we received 6 month results for the period ending 31 December 2014 from Discovery. This is our only recommended stock that falls within the financial services sector. Although there is a big healthcare element to this business which they have targeted as a disrupter in the industry. More on that later, lets first look at the financials.


Discovery trading update


Discovery Holdings released a trading statement yesterday for the 6 months to end December 2014. A quick refresher, remember that the company bought the rest of the JV with Prudential in November: Discovery buying out PruHealth. The company updates, remembering that there are actuaries galore at Discovery, you need to read this trading statement carefully: "following Discovery's acquisition of the remaining 25% issued share capital of Prudential Health Holdings Limited, the holding company of PruHealth and PruProtect joint venture, from Prudential Assurance Company ("Prudential"), the accounting of the puttable non-controlling interest in respect of Prudential's put option falls away, and the difference between the current value and the purchase price of the 25% will be released to the income statement for the six months ended 31 December 2014." Of course you say, why didn't I do the math on this one, I should have known! As a result, guidance for the half just passed is as follows:


Trading update


Discovery have released a trading statement yesterday, the market was pleased I think with the overall performance. How can I say that when the trading statement came out at five minutes past the "closing bell"? It is not a trading statement that is ordinary, the release points out that as a result of acquiring all of Prudential's shares in the JV, the undiluted and basic earnings per share are expected to be 85 percent higher than the 301.4 (undiluted EPS) and 307.7 cents (basic EPS). That 85 percent is around 260 cents, just for the half year that is. Wow, that sounds huge! Wait, there is more: "The accounting effects of the release of the put option liability will not have any impact on normalised earnings or normalised headline earnings per share." More complicated actuary speak, I must ask friends of mine who are in that field. Yes, I have friends. So, given all this difficulty, a more detailed trading statement for this half will be released mid February next year. We shall see where the market settles this morning.


Discovery buying out PruHealth


Discovery hit the market with a huge announcement, firstly teeing us up around 7:30 in the morning with news of a conference call at 11:30, to share important developments surrounding its international business strategy. The announcement came at 11 on the dot, the release via the Stock exchange News Service that Discovery had agreed to purchase the final 25 percent of the holding company of PruHealth and PruProject from Prudential for the princely sum of 155 million Pound Sterling. This was a year ahead of an option to acquire the final amount from Prudential.


Discovery, makes you live longer


Yesterday Discovery released a solid set of results for the full year ending June 30th. Starting off with the key figures, Normalised headline earnings are up 23%, new business is up 15% and embedded value is up 21%. The reason for using the new business number instead of revenue is because the revenue number is largely irrelevant to insurance based businesses.


Another really good set of results


Yesterday we received interim results from Discovery for the 6 months ending December 2013. Here are the financial highlights.


Trading update well received


Trading statements time, of course these are always in the mix. But December year ends will dominate, in this case it is the half year. This morning we have seen a trading update from Discovery. Normalised headline earnings per share are expected to be be between 15 to 25 percent better than the corresponding period (and in the period prior it had grown 20 percent), but earnings per share and headline earnings per share are set to register between 30 to 40 percent growth when measured against the corresponding period. So on a "normalised" basis, expect around 290 cents per share for the half, whilst HEPS is expected to be around 300 cents per share. Results are expected next Thursday and we will cover them with a whole lot more detail. The stock is enjoying a fabulous day, up nearly four percent after a recent rout, which was across all emerging markets. Good. Happy with this and confirmation that the business continues to grow.


Same seller, same buyer


Discovery news yesterday, someone, somewhere is buying shares from a strategic shareholder that is selling down their stake. At a discount to the prevailing market price. Standard Bank of course wouldn't say who, other than it was not Adrian Gore. It turns out that it was the refinancing of a BEE transaction, the strategic investor being the WDB. The WDB of course is the allocation of funds to women in rural areas of South Africa. As much as we like to think that we are all equal, it is true that rural woman in South Africa are amongst the most vulnerable in our society.


Discovery continues to grow and innovate. FY numbers


Discovery released results for their full year to end June 2013 yesterday, the stock rallied 3.2 percent to close at 8700 off the day highs of 8830, but pleasing after the drubbing that the stock took post the trading statement. You will remember that we covered the poorly worded trading update last week: Discovery trading update spooks market. A little birdie told me that CEO Adrian Gore was out of the country on business, and he was less than pleased. Yesterday however he put his best foot forward, the guy really looks good for someone who turns fifty next year, even though there is a little greying at the edges, that is a sign of age, which means more experience. Right? Right!


Discovery trading update spooks market


Discovery. Price discovery in the case of Discovery Limited. A strange one, full of moving parts and perhaps prepared by smarter people than ourselves. The first part of yesterday's trading statement was all fine: "Shareholders are advised that normalised headline earnings per share are expected to be between 15% and 25% higher than that of the corresponding period." OK, that part looks pretty encouraging, seeing as this is for the full year to end June 2013. The results themselves are expected on the 3rd of September.


Discovery team up with major in Hong Kong


Discovery Limited, what happened there, the stock was up 6.63 percent to close out at an all time high of 92 ZAR a share? It is now the 25th biggest company by market capitalisation listed on our exchange. Bigger than AngloGold Ashanti. Yes, really! Interesting coincidence, Life Healthcare is nearly bigger than Gold Fields. New economy globally is trending towards healthcare, as people want to maintain a healthy lifestyle and of course in Discovery's Vitality program incentivising them to do so. For instance in my personal case, I am both a member of their medical scheme as well as having life insurance with Discovery. If you quite simply do a whole lot of tests (easy ones), you can get paybacks for the "health integrator" systems. Significantly more if you lead a healthier lifestyle, as you can see this is great for the company that you are sharing your personal medical details with them. If they can tell that you are healthy, they don't mind incentivising you and giving you rebates on all sorts of things.


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