A place for hybrids and forward multiples

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Question: Thanks for your comments in the Switzer program on Sky on Monday evening regarding the Medibank IPO. You mentioned the term “forward multiple” a couple of times in arriving at your estimate that the $2 top range price is a bit on the high side. Can you elaborate please?

Answer (By Paul Rickard): It is the price/earnings multiple. I use the word 'forward', because it applies to FY15.

Take Medicare as an example:
Share price: $2.00
Number of shares: 2,754 million
Forecast net profit after tax (NPAT) for FY 15: $258.2 million
Earnings per share (258.2/2,754) = 9.38c

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