Our opinion on the current state of DISCOVERY(DSY)

Discovery (DSY), developed and built by Adrian Gore over the past 25 years, offers the A/B income group of people a matrix of financial services that are inter-linked and cross-selling. Thus, a customer can begin with his/her medical aid and then add a variety of insurance products and, most recently, personal banking products.

Discovery's "Vitality" concept, which rewards clients for looking after their health in various ways, is extended to their driving record and a rewards system that ensures attractive benefits for taking the full range of Discovery debit-order products. The Vitality platform tracks over 1000 customer activities and 50 biometrics a minute using the Apple Watch in South Africa, the UK, China, Europe, and the US to ensure a process of healthy aging and retirement planning.

Discovery's Chinese company, Ping An Health, in which Discovery has a 25% stake, saw membership grow by 60% over the year, and written premiums increased by 87% to 753m. Ping An is rapidly developing into Discovery's "Tencent."

Discovery's move into banking offers existing clients a range of banking and credit card facilities. The banking license was approved in November 2017 and should significantly increase the profits generated by the group in time. This is a disruptive development that will seriously shift the banking of A/B income group consumers away from existing banks. Discovery Bank's aim was to bring in 1000 new accounts per day from the end of August 2019.

The company has seen a drop in car accident claims and medical insurance claims since the lockdown. This is a highly rated share despite the decline in its share price over the past two years. Discovery Bank has now reached 700 000 active clients, and those clients are mostly of very high quality—but the progress has been relatively slow, partly because of the pandemic.

Discovery shares remain expensive, but we regard this as one of the best shares for a private investor to hold for long-term growth. CEO Adrian Gore says, "I am a great believer that opportunities are not in good times," indicating his belief that growth comes from investing during the difficult times South Africa is currently experiencing. Gore has also stated that the NHI, as it is proposed, is unaffordable for South Africa and that there are insufficient medical resources to implement it.

Discovery became the first large, listed company to require all its staff to be vaccinated. On 20th June 2022, the bank reported that it had more than 1 million accounts and was taking on about 750 new accounts per day.

In its results for the six months to 31st December 2024, the company reported total revenue up 42% and headline earnings per share (HEPS) up 33%. The company said, "Capital ratios remained strong across every business and liquidity at each regulated entity, and at the centre, remains well in excess of the required buffers. The cash conversion ratio remained steady at 75% of after-tax normalised operating profit compared with the prior period, notwithstanding the strong growth in normalised profit from operations."

Technically, the share has been in a strong upward trend since June 2024. We added it to the Winning Shares List (WSL) on 1st August 2024 at 14280c. It has subsequently moved up to 20882c. Due to the quality of its management and business model, we see this as a "must-have" share for any private investor's portfolio.