Global banking giant Citi rates Discovery, which is due to open the digital doors of its new bank this week, as a high-risk investment and sees most of the company's businesses as "value-destructive ventures". Discovery, a darling among investors and one of the JSE's 25 biggest companies, has a market capitalisation of nearly R100bn, but at current levels is overvalued by more than 50%, according to a Citi research report. Among the red flags for Discovery, Citi lists high levels of debt gearing, the regulatory risk associated with health insurance, complex products and cross-selling, and the company's dependence on its strong retail brand in SA. "We view SA health as Discovery's only attractive business out of 10," stated the report sent to Citi's institutional clients. Discovery, whose health business generated a third of the group's operating profit last year, has been a financial sector success story over the past two decades. It has built one of SA's best-known medical funds an...
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