Our opinion on the current state of 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 which are inter-linked and cross-selling. Thus a customer can begin with his/her medical aid and then add to that a variety of insurance products and now, 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 that there are 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 by 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 being generated by the group in time. This is a disruptive development which 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 such as 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 2023 the company reported headline earnings per share (HEPS) down 1% and net asset value (NAV) up 20%. Embedded value per share increased by 11%. The company said, "The Group generated normalised operating profit growth of 13% to R5 622 million with positive contributions from each composite, as South Africa (SA) increased 9%, United Kingdom (UK) increased 13% and Vitality Global (VG) increased 71%. The UK and VG results benefitted from a weaker rand compared with the prior period".

Technically, the share has been moving sideways since December 2020. Due to the quality of its management and business model, we see this as a "must have" share for any private investor's portfolio.