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Australia's Medibank debuts at premium to issue price

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Shares in Australian health insurer Medibank Private debuted at a premium to their issue price on Tuesday after raising A$5.7 billion ($4.91 billion) in Asia's biggest initial public offering in two years.

The shares first traded at A$2.22 at 0100 GMT, a premium of 3 percent for institutional investors in the initial public offering and 11 percent for retail investors, who received 60 percent of the company. The broader market fell 0.8 percent.

The solid performance by Australia's biggest listing of a state-owned firm in 18 years reflects investor appetite for exposure to the country's health system, which is propped up by an ageing population, two decades of continuous personal wealth accumulation and generous state subsidies.

Adding to Medibank's appeal, institutions running index funds will be obliged to buy the shares, pushing them even higher, because the company will join the benchmark S&P 200 index in January while they own relatively little of it.

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Medibank's positive listing performance could also prove politically beneficial to a government struggling to win support for policies like its plan to pay for capital works and pay down debt by selling A$130 billion of public assets.

Some analysts say however that the insurer is overpriced and will now face pressure to grow earnings faster than its cost-cutting strategy will allow.

"If you're not thinking about selling, then obviously you think you can trade even higher than this and it would be a dumb number," CLSA analyst Jan van der Schalk said.

"I'm stumped. If I held (Medibank) stock, well, I wouldn't now."

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The company was trading at a multiple of 23.5 times 2015 forecast profit, while the only other listed Australian health insurer, NiB Holdings, was trading at 17.7 times.

Of the general insurers, Insurance Australia Group was trading at 12.8 times 2015 profit and Suncorp Group traded at 13.3 times.

Healthcare companies are expected to account for about three quarters of the total capital raised in what is set to be Australia's biggest year of IPOs by dollar value.

The same day Medibank listed, nursing home operator Estia Health began a book-build to raise A$834 million in Australia's fourth-biggest IPO of the year.