For full disclosure, I happened to find myself in the then very new London offices of M&G (MNG), the fund management spin-off from insurance giant Prudential (PRU), a few months ago. I was helping out a couple of contacts of mine figure out if a couple of their fund managers knew their stuff or not. We will gloss over what I specifically thought...but the other lasting impression from the meeting was that the very nice offices amusingly had intermittent IT problems. It is always thus with a spin-off. An investor has to balance the potential from newly liberated entrepreneurial flair with the reality of teething issues. Prospective numbers and targets are always a bit up in the air and credibility only builds with the publication of some truly independent numbers. The share listed a week ago at 220p a share (an implied market cap of £5.6 billion) and is currently trading as I write at...221p! So what to think?
With fund management companies, there are three ways to value. The first is naturally earnings – and adjusted operating profits of just over £700 million should get the value investors interested. But hang on...year-on-year profits in 2019 are down versus a year previous, even before we dig into the 'adjusted' rationales. And with active management challenges such as an enhanced fee focus and the rise of passives...perhaps a single digit earnings multiple is justified. Certainly the profit declines were coming from the core asset management operations, with new areas such as with-profits funds not fully offsetting.
So what about cash flows? Chat about a three year target of £2.2 billion worth of capital generation and £465 million of dividend generation this year should excite cash flow watchers. Yes, that is a decent higher single digit dividend yield and seemingly the underlying capital generation to make it sustainable, especially as the solvency ratios quoted by the group look solid enough. Naturally as per the above, you could highlight industry-level challenges that could impact...but overall I can see why income-centred investors may want to take a look. And then there's funds under management. £341 billion (diversified between retail and institutional), up 6% year-on-year, puts the group's market cap at not even 2% of assets under management and administration. The latter is an important word but ceteris paribus there does appear a value story on this metric too, as typically for a big beast such as M&G I would expect this figure to be 2-3%.
In short, there are three measures which suggest a spin-off value opportunity for investors. When I look at M&G I see history and relative solidity plus - as seen by the asset-driven and international push (sometimes using the Prudential name and sometimes M&G) - there is some scope in a world where progressively I think active management is going to come back into fashion, even if global capital markets are a bit all over the place. It may have a Tower of Babel style new HQ...but in the wider scheme of things I will not hold it against it. Buy – I am targeting a 250p+ share price target over the next year plus a collecting of a reasonably chunky dividend. And if you are worrying about how prospectively volatile investment markets may impact...then there are always bad boys St James's Place (STJ) and Hargreaves Lansdown (HL.) to use as a short against it.
Filed under: M&G, Bearcast, Mike Ashley, Eurasia Mining, Blackmore Bond, Eckoh, TomWinnifrith.com
RISK WARNING & DISCLAIMER - FiveFreeShareTips.com tips are provided by independent authors via a common carrier platform and do not represent the opinions of FiveFreeShareTips.com. FiveFreeShareTips.com does not accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at FiveFreeShareTips.com and via emails you receive from [email protected] are for your general information and use and are not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by the tipsters or FiveFreeShareTips.com and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Trading shares involves the risk of loss. The tipsters and FiveFreeShareTips.com shall not be liable for any losses or other damages incurred. The value of investments can go up or down and the past is not necessarily a guide of future performance.
Well actually it will be six. One every week day and one on Sunday, each landing with you at 11 AM sharp.
Unlike other services (which may always have a vested interest) we pride ourselves on our impartiality and cover all small caps including AIM. the Standard List, The Wider Main Market and NEX.
We cover small caps, penny shares, FTSE 350 stocks and blue chips. We look for red hot penny shares, Warren Buffett style value investments with yield and growth stocks. There is no technical analysis in our work just solid fundamental analysis from a team of experts with decades of stockmarket experience.
You will not agree with all we publish but if you are interested in small caps you cannot afford to ignore it either. Yo'll never be charged for the free share tips from Five Free Share Tips and given the star writers involved you know that they will move share prices.
There's no telephone number or postal address required and there is no charge, ever, for your Five Free Share Tips membership. Just free shares tips every day apart from Saturday And each day's share tip will not just be a few thoughts cobbled together but will be detailed analysis from experts.
Our experts do not just earn their living from writing. All own shares. If they own shares in a stock they cover they will declare it and will not sell until after advising a sell to our readers. And why not our tips are so good that why shouldn't our readers put their money where their mouth is?
Don't just take our word for it! Judge us on the calibre of our free share tips and join today to start receiving them from September 1 2017. If you don't like what you get delivered to your inbox unsubscribe and you will never hear from us again. So why not give it a go? Sign Up Now
We've put together a panel of top tipsters, including:
Tom Winnifrith, in his 27th year writing about shares, noted fraudbuster & dubbed "The maverick Tipster"
Chris Bailey, City whizz kid turned financial guru, rated as one of the top 50 commentators on shares on twitter, founder of Financial Orbit
Steve Moore, has worked with Tom Winnifrith for all bar 3 weeks of his working life - a noted commentator on value stocks
Malcolm Stacey, The Grandfather of Share Blogging, the founder of ShareCrazy & a best selling autthor of stockmarket books
Lucian Miers, the Bard of the Boleyn, one of the UK's best known short sellers
Gary Newman, writes about value investing on AIM, speciality is in share tips on oil and mining companies
Nigel Somerville, The Deputy Sheriff of AIM, an expert in forensic analysis a skill used to bust frauds but also to tip true value investments
The team from HotStockRockets, specialising in AIM and small cap shares which will fly on a three month view
Remember to book your place at the UK Investor Show 2018. The UK’s top investment show taking place on Saturday 21 April 2018 at the Queen Elizabeth II Conference Centre in Westminster, London. The show will feature a unique line-up of top speakers including Nigel Wray, tech queen Vin Murria, Dave Lenigas, Mark Slater, Tom Winnifrith, Adam Reynolds, Ed, Croft, Nick Leslau Luke Johnson and Dr Johnny Hon as well as 135 exhibiting small cap companies.
The hot share tips given here are of necessity, general. They cannot relate to the individual circumstances of investors. Anyone considering following the share tips contained here should seek independent advice from a Financial Conduct Authority authorised Stockbroker or Financial Adviser. We cannot be held liable if individuals suffer losses through following share tips contained on this site or emailed out as free share tips. The value of investments can go down as well as up. The past is not necessarily a guide to future performance. Investing in shares can lose you part or all of your capital although the potential returns are theoretically unlimited. The difference between the buy share price and the sell share price for smaller company shares (penny shares) can be significant. Profits from dealing in shares may be liable to tax - the level of tax and bases of relief from tax are subject to change. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Some of the shares recommended on this site will be smaller company shares. By their nature such investments can be relatively illiquid and thus hard to trade. And that makes such investments more of a high risk than larger company shares (or 'small caps'/'penny shares'). FiveFreeShareTips.com & its sister site ShareProphets.com defines a smaller company share as any stock traded on AIM or NEX or which has a market capitalisation of less than £300 million.