Phoenix Group Holdings PLC (LON: PHNX)  

Phoenix Group Holdings PLC is an FTSE 100 index listed one of the largest providers of insurance services in the United Kingdom. Moreover, PHNX provides the largest long-term savings and retirement business with approximately 13 million customers and around £300 billion of assets under administration.

On 14 March 2022, PHNX will release FY21 results.

Recent trend of Dividend Payments

The Company had paid an interim dividend of 24.10 pence per share attributable for H1 FY21 on 03 September 2021, with an ex-dividend date of 19 August 2021. In comparison, PHNX had paid 23.40 pence per share of interim dividend attributable for H1 FY20. Thus, the year-on-year growth remained approximately 3%.  

(Source: LSE; Analysis done by Kalkine Group)

Growth Prospects

• Strategic Priorities: The Company had invested in to support future growth with the acquisition of the Standard Life brand. Moreover, PHNX had maximized shareholders’ value from the European operations with the disposal of Ark Life for a total cash consideration of €230 million.
• Impressive Debt Portfolio: PHNX has a high quality £33 billion shareholder debt portfolio. Moreover, it is having a 99% investment grade with only 19% rated BBB and 2% BBB-.
• Customer Satisfaction: The Company had maintained a strong customer satisfaction scores of more than 90%. Meanwhile, PHNX had shown accelerated investments in digital capabilities with a 34% year-on-year increase in mobile app logins.

Key Risks

• 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.
• UK GDP: The UK economy witnessed a disappointing GDP growth of around 1.1% during Q3 2021, less than the estimates.
• Bank of England Meeting: The Bank of England had announced an increase of 0.15% in the interest rates. Thus, it may adversely impact the UK Equities.
• Net Loss: PHNX had reported a net loss for H1 FY21.
• Regulatory Risk: Insurance sector is highly susceptible to change in the government’s policy, legislation and capital requirement. Any lack of meeting the regulatory requirement can result in the additional cost and penalty.

Now, we will analyse the Key Fundamental Statistics & Shareholding Pattern of Phoenix Group Holdings PLC.  

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

(Source: Company result)

• Cash Generation: PHNX had shown more than 100% increase in the cash generation to £872 million in H1 FY21, illustrating the scale of the enlarged Group.
• Profitability: On the profitability front, PHNX’s operating profit increased from £361 million during H1 FY20 to £527 million for H1 FY21.
• Resilient Balance Sheet: PHNX had maintained a resilient balance sheet with a Solvency II surplus of £5.1 billion as of 30 June 2021.

Share Price Performance Analysis

(Source: Refinitiv; Analysis done by Kalkine Group)

On 24 December 2021, at 08:12 AM GMT, PHNX’s shares were trading at GBX 651.60, up by around 0.22% from the previous day closing price. Stock 52-week High and Low were GBX 764.37 and GBX 616.40, respectively.

From a technical standpoint, PHNX is hovering above the 20-days exponential moving average of GBX 645.00, indicating an upside potential in the stock price. Moreover, the MACD line remained above the signal line, illustrating a bullish price momentum.

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

Business Outlook

PHNX had completed several acquisition and disposal activities with an aim to generate maximum returns for the shareholders. Furthermore, the Company had achieved decent operational profitability for H1 FY21 and maintained a strong financial position to pursue further growth opportunities. It remained on track to meet the top end of the FY21 cash generation guidance ranging from £1.5 billion to £1.6 billion for 2021. Over the next 2 years, the management believes that it could achieve a higher cash generation target of £4.4 billion on the back of new business and management actions. Looking ahead, the management will continue to optimize its heritage business, while the recent acquisition of Standard Life brand will support accelerating Open business growth strategy.

Considering the decent H1 FY21 results, strong cash generation guidance, consistent dividend payments, significant acquisition & disposal activities, and support from the valuation as done using the above method, we have given a “BUY” recommendation on Phoenix Group Holdings PLC at the current price of GBX 651.60 (as on 24 December 2021 at 08:12 AM GMT), with lower-double digit upside potential based on 1.25x 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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