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Date : 15/11/2022

Medibank and Brainchip ASX – Is there a buying opportunity?

Shares in Value has been monitoring and closely following these two ASX blue chip companies for years. Join us as our award-winning team of research analysts further the discussion and recommend the next smartest move to make. 

Whilst Medibank Private Health Insurance and Brainchip Holdings Ltd. are not in the strongest positions right now, companies of their calibre are historically known to resist headwinds. The question is – can they really? 

 

medibank private limited on tradingview
Source: Tradingview.com

Medibank Private Health Insurance (ASX: MPL) 

Medibank Private was recently hit by a huge cyberattack, the fifth reported in Australia in less than a month. While the attack itself is a poor reflection of the company’s risk management procedures on cyberattacks, the subsequent reduction in share price may provide an opportunity, although at a higher level of risk.

Medibank Private’s blue chip ASX shares were trading in the $3.50 range prior to the latest report on the scope of the cyberattack’s impact. With news about the expenses of the hack rolling in, this blue chip ASX share price fell more than 20%,  amounting to a $1.7 billion loss in market capitalisation.

Medibank Private has progressively shared details about the cybercrime incident, which is being probed by the Australia Federal Police (AFP). The investigation has established that the criminal has access to all the personal data and significant amounts of health claims data of their ahm, international student, and Medibank customers, from emails to passports and driver’s licenses. 

According to the AFP, the hackers behind the damaging Medibank Private hack are Russian cybercriminals. They operate like a company, with affiliates and partners to help them.

Here’s what we know so far. 

Because of the scale and sensitive nature of the incident, Medibank Private will be responsible for consumer compensation and other obligations as investigations continue. Another issue weighing on Medibank Private is the possibility of fewer policyholders if consumers leave the company. 

 

3 Reasons Why the Market Reaction May Be Overdone

The Impact on Earnings is a One-Time Cost

According to market projections, Medibank Private should achieve an EBIT of $600 million in FY23. If the cost of the cyberattack clean-up is as high as projected, profits would decline by 25% in FY23.

Experts’ worst-case scenario is that the maximum financial effect for FY23 would be in the $150 million range.

Remember that this is a one-time expense, and earnings will return to normal in FY24 and beyond. Given that Medibank Private is one of Australia’s most recognisable consumer brands and that interest rates are anticipated to stay high in the near to medium term, Medibank Private‘s bottom line may recover faster than predicted.

However, below are possible instances that may directly affect the company’s financial health. These are also some of the areas of concern for investors.  

  • Hacker has demanded a ransom, and Medibank Private might decide to pay up
  • The company needs to cover any litigation fees that could emerge from lawsuits

 

Medibank Private May Not Lose Customers

Medibank Private has the industry’s biggest market share at over 27% and has continuously witnessed policyholder growth of roughly 3% year on year.

Despite the attack, Medibank Private remains to be Australia’s biggest health insurance provider and can still be the best option for clients looking for health insurance products.

 

The Credibility of Management

Medibank CEO David Koczkar has a hard job on his hands right now. But we believe he has the capacity to handle this. David has over 25 years of strategy, customer, commercial and operational experience, including previous work in the strategy consulting and financial services industries.

Likewise, Medibank’s Chairman Mike Wilkins has a similar stellar CV. He has been the Chair since March 2020 and a director since November 2016 of QBE Insurance Group. Mike has more than 30 years of experience in financial services, predominantly in Australia and Asia.

The two key members of Medibank Private’s executive team have extensive expertise in customer-focused enterprises, demonstrating a strong capability to hold down the fort at Medibank Private.

Medibank Private shares may be a good deep-value opportunity for investors with a higher risk appetite. We recommend a WATCH on this ASX blue chip stock, and we shall update once the investigation details become clearer.

2022 first half results
Source: Tradingview.com

 

BrainChip Holdings Ltd (ASX: BRN)

BrainChip Holdings Ltd. has all the makings of a great investment. We know this company quite well by now, and we have recommended it a few times since we began covering it in 2020, with Brainchip ASX trading at $0.32 a share.

The company is the global leader in artificial intelligence (AI) on-chip processing and learning, and among BrainChip’s customers are Mercedes-Benz and NASA. 

 

What you should know about Brainchip ASX

  • Revenues of $4,831,081 for the half-year ending 30 June 2022 climbed 529% from $767,545 at the same time last year.
  • Brainchip Limited reported a net loss after tax of $8,255,802 for the half-year ended 30 June 2022 (30 June 2021: $9,298,244).
  • R&D expenses included the $450,000 received by Socionext as the last milestone payment for the production of the Akida device and $927,590 in third-party licences and hardware for the creation of next-generation Akida engineering prototypes.

The question: Is there a buying opportunity?

It’s still looking good for Brainchip ASX shares, and we still recommend a BUY

BrainChip has progressed on the commercialisation leg of its business operations. Couple this with BrainChip’s differentiated IP product, and we see that the firm is delivering a proven and exponential improvement on anything else available in the market. 

Additionally, the AI chip manufacturer has received a US patent for “An Improved Spiking Neural Network,” which essentially protects a crucial learning feature when selecting synapses for weight variation during on-chip learning for its Akida chip. 

It adds to BrainChip’s patent portfolio, which includes 10 in the United States, one in China, and 27 pending in  Brazil, Australia, Canada, Europe, India, Israel, Japan, Korea, Mexico, Russia, and the United States.

To preserve its edge over the expanding number of rivals in the Edge AI field, the business continues committed to obtaining and maintaining patent protection on all current and future advances across several global jurisdictions.

 

Blue Chip ASX Shares News and Insights:

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