Phoenix Group Holdings PLC (LON: PHNX)  

Phoenix Group Holdings PLC is an FTSE 100 index listed Company focused on the 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 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%.  

Growth Prospects

• Strategic Priorities: The Company had invested 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.
• Environmental Targets: The Company has committed for the operations to become net-zero carbon by 2025. It is also setting a net-zero by 2050 target for the investment portfolio.

Key Risks

• Financial Risk: The company’s performance depends on the market price of its assets, including bonds, and any decline in price of such asset could lead to an impact on the financial performance and commitments of the group.
• Subdued Macroeconomic Conditions: The dented risk appetite of investors amid record inflation rate in the UK, Ukraine war crisis, expectations for further interest rates hikes, and uncertain demand outlook.
• 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 additional cost and penalties.

Key Fundamental Statistics & Shareholding Pattern of Phoenix Group Holdings PLC.

MS&AD Insurance Group Holdings, Inc is the most significant shareholder as it holds nearly 144.88 million shares as of 31 December 2021.      

Recent News

Board Changes: On 23 February 2022, PHNX announced the appointment of Katie Murray as an independent Non-Executive Director with effect from 1 April 2022.

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

(Source: Company Filings)

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

Share Price Performance Analysis

(Source: Refinitiv; Analysis done by Kalkine Group)

On 25 February 2022, at 09:28 AM GMT, PHNX’s shares were trading at GBX 590.19, up by around 0.20% from the previous day closing price. Stock 52-week High and Low were GBX 764.37 and GBX 589.00, respectively.

From a technical standpoint, PHNX is hovering below the lower Bollinger band, indicating an upside potential in the stock price. Moreover, the 14-days RSI of ~23.15 confirms an oversold position.

Valuation Methodology: Price/Book Approach (FY22E)

Business Outlook

The balance sheet remained resilient, underpinned by a unique approach to risk management and a high-quality portfolio of assets. The Company is well-positioned to continue to drive net flows and to deliver earnings growth as it continues to expand internationally. PHNX had completed several acquisition and disposal activities with the aim to generate maximum returns for the shareholders. 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 two 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.

Considering the strong dividend yield, strong cash generation, regular dividend payments, recent 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 590.19 (as on 25 February 2022 at 09:28 AM GMT), with lower-double digit upside potential based on 1.12x Price/NTM Book Value per share (approx.) on FY22E book value per share (approx.).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios. 

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

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