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After Medibank Private Ltd what will be the next privatisation to profit from?

It’s a rarity in financial markets for the little guy to win against the big guy, but so far that appears to be the case with regard to the initial public offering (IPO) of private health insurer Medibank Private Ltd (ASX: MPL).

Retail investors were able to purchase shares in Australia’s largest private health insurer from the government at $2 per share. In comparison institutional investors ended up paying $2.15 per share. As we approach the close of trade on Friday, Medibank Private looks set to finish its first full week at $2.14 per share.

It’s certainly not the stag profit investors had been hoping for! Despite subdued trading in the stock however, at least retail IPO investors are still out in front and sitting on gains of 7%.

Whilst most investors will only view the privatisation and float of Medibank Private through the prism of their share portfolio, there is another important factor to consider. As Australian citizens “we” were the ultimate owners of Medibank Private and the premium sale price achieved was outstanding for “us” as vendors.

No doubt the flow of sale proceeds into the government’s coffers will be welcomed by the treasurer Joe Hockey. Equally likely is the encouragement this will have for further privatisations by both Hockey and his fellow state-based treasurers who will all be glancing around for what else they can sell…

Indeed there are a number of appealing government-owned assets which have good cash flows and would likely be enthusiastically snapped-up by investors in any IPO.

Airports are one industry sector that is highly appealing to investors. The success of Sydney Airport Limited (ASX: SYD) as a listed entity would be likely to make the sale of still publically-owned airports such as Adelaide Airport popular with investors.

While few ports have made it into the public domain with these assets generally held by large sovereign wealth funds, pension funds and infrastructure investors, there are no less than three ports – Melbourne, Darwin and Gladstone – all muted to be on the sale block. Should any of these find their way onto the ASX they would also be highly sought after.

A third industry that would also be attractive to privatisation by governments is hospitals. Healthcare is certainly a hot investment sector at the moment and the success of listed firms such as Ramsay Health Care Limited (ASX: RHC) and Healthscope Ltd (ASX: HSO) would make this space particularly popular with investors.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned.

 

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