M&G PLC (LON: MNG)  

M&G PLC (LON: MNG) is an FTSE 100 index listed investment management Company engaged into the savings and investments business that manages around 800 institutional clients & 5 million retail customers in 28 markets. The Company had £370 billion of assets under management and administration as of 30 June 2021.

On 08 March 2022, MNG will release FY21 results.

Recent trend of Dividend Payments

The Company had paid an interim dividend of 6.10 pence per share attributable for H1 FY21 on 29 September 2021, with an ex-dividend date of 19 August 2021. In comparison, MNG had paid 6.00 pence per share of interim dividend attributable for H1 FY20. Moreover, the Company had paid a total dividend of 40.1 pence per share since the shares got listed in October 2019.

Growth Prospects

• Regulatory Approval: The Company has recently received regulatory approval for the acquisition of Independent Financial Adviser Sandringham Financial Partners. Moreover, the acquisition will bring £2.5 billion of assets under advice, with around 180 advising Partners acting on behalf of over 10,000 individual clients.
• Strong Capital Generation: MNG had generated a total capital of £869 million during H1 FY21, taking shareholder Solvency II coverage ratio to 198% (31 December 2020: 182%). Moreover, it illustrates the strategy of hedging the impact of market volatility on the Solvency II balance sheet. The Company remained on track to meet the target of £2.2 billion capital generation by the end of 2022.
• Impressive Collaborations: The Company’s wealth division entered a strategic partnership with software house Ignition Advice to develop hybrid advice, a blend of human and digital practices. MNG offers both smoothed market returns and positive environmental or social outcomes with the launch of PruFund Planet in July 2021.
  

Key Risks

• Weak Leverage Position: The Company’s debt-equity ratio and the assets-equity ratio remained more than that of the respective industry median during H1 FY21.
• US Inflation: The U.S. consumer price inflation has touched 40 years high during December 2021. Thus, it may cause a sooner-than-expected interest rate hike.
• Omicron Variant: The Government-led restrictions under Plan B because of an increasing number of Covid-19 cases in the UK may adversely impact the UK Equities.

Now, we will analyse the Key Fundamental Statistics & Shareholding Pattern of M&G PLC.

BlackRock Institutional Trust Company, N.A is the most significant shareholder as it holds nearly 171.85 million shares as of 31 December 2021.      

H1 FY21 Financial & Operational Highlights (for the six months ended 30 June 2021, as of 11 August 2021)

 (Source: Company result)

• Asset Under Management: MNG had shown a decent growth of £2.8 billion in Asset under Management & administration to £370.0 billion.
• Net Clients Inflows: The Company had demonstrated a record level of £89.7 billion in institutional public & private assets under management, with robust net client inflows of £2.2 billion during H1 FY21.
• Profitability: The adjusted operating profit before tax went up by around 6% to £327 million during H1 FY21.

Share Price Performance Analysis

(Source: Refinitiv; Analysis done by Kalkine Group)

On 14 January 2022, at 10:18 AM GMT, MNG’s shares were trading at GBX 212.10, down by around 0.47% from the previous day closing price. Stock 52-week High and Low were GBX 254.30 and GBX 173.69, respectively.

From a technical standpoint, MNG is hovering above the 20-days exponential moving average of GBX 204.12, indicating an upside potential in the stock price. Moreover, the MACD line remained above the signal line, illustrating a bullish price momentum.

Over the last three months, MNG’s stock price has delivered a positive return of ~5.94%, and it has outperformed the FTSE 100 index (benchmark index) with a return of about 4.85% and FTSE All-Share Financials index (benchmark sector) with a return of around 5.15%.

Valuation Methodology: Price/Book Approach (FY21) (Illustrative)

Business Outlook

MNG had achieved a record Institutional asset under management and robust capital generation during H1 FY21. Furthermore, the Company would continue to invest in the modernisation of the business and remained on track to achieve £145 million annual run-rate shareholder cost savings in 2022 with the support of the transformation programme. The Company will further cement its position in the UK savings and investment market with the proposed acquisition of Sandringham Financial Partners. Looking ahead, the Company remained well-positioned for strong growth in the Institutional Asset Management with £4 billion of committed client capital and a further £5.5 billion of client wins yet to be funded. Overall, the Company aimed to generate long-term returns for the shareholders driven by the good pipeline of new propositions with sustainable investment offerings.

Considering the progressive dividend policy, strong capital generation, decent growth in Asset under Management, and support from the valuation as done using the above method, we have given a “BUY” recommendation on M&G PLC at the current price of GBX 212.10 (as on 14 January 2022 at 10:18 AM GMT), with lower-double digit upside potential based on 1.15x Price/NTM Book Value per share (approx.) on FY21E book value per share (approx.).

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peer information have been taken from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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