M&G PLC

M&G PLC (LON: MNG) is engaged into the savings and investments business that manages around 800 institutional clients in 28 markets.

Investment Rationale – BUY at GBX 199.50

• On 18 August 2021, M&G announced acquisition of Sandringham Financial Partners, which is an independent financial advice provider. The acquisition will add £2.5 billion of assets under advice to M&G PLC.
• With total capital generation of £869 million in H1 FY21, it is on track of meeting the target of £2.2 billion of capital generation by the end of FY22.
• MNG is on track to achieve cost-savings of £145 million through business transformation and modernisation by FY22.
• It has a good pipeline of new propositions, increased traction among clients, robust capital generation and attractive dividend policy, which shall generate a significant value for its shareholders
• As per valuation metrics, Price/Earnings, Price/Cash Flow, and Price/Book Value multiples of the M&G PLC are currently lower as compared to the corresponding multiples of the Financials industry.
• From a technical standpoint, 14-day RSI (~37.57) is in the oversold territory, while the stock price is hovering close to the lower Bollinger Band.
• MNG has a higher dividend yield than median of the Financials industry.

Risk Assessments

• If the debt limit caps doesn’t increase in the US, it can crate cash crunch for the government.
• The likelihood of China Evergrande’s debt default risk poses a systematic risk to the financial markets.
• The structural changes imposed by the Covid-19 pandemic has significantly changed the consumers’ behaviour.

Recent News

New Executive Appointment: On 13 September 2021, MNG appointed Clare Bousfield as managing director of Retail & Savings.

Interim Results (for the six months ended 30 June 2021, as on 10 August 2021)

 (Source: Company Website)

• MNG continued strong total capital generation and has repositioned the business for sustainable growth.
• Following net client inflows of £2.2 billion, the Company’s Institutional assets under management reached a record £89.7 billion.
• The Company recommended an interim dividend of 6.1 pence per share, following the 6% year-on-year increase in adjusted operating profit before tax.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

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

Conclusion

M&G has robust capital generation and solid dividend policy, reflecting solid balance sheet. It also has a good pipeline of new propositions with sustainable investment offerings. Moreover, the M&G Wealth's position will be bolstered by the recent acquisition of Sandringham Financial Partners and shall complement its existing network of advisers. MNG seems optimistic about the recovery in Retail Asset Management on the back of continued action on investment performance and improved value-for-money for its clients. The Company has £4 billion of committed client capital in the Institutional Asset Management, and its well-placed for solid growth. The stock made a 52-week high and low of GBX 254.30 and GBX 143.75, respectively.

Based on the continued strong total capital generation, decent pipeline of new propositions, solid balance sheet, supported by the valuation conducted above, we have given a “BUY” recommendation on M&G PLC at the closing market price of GBX 199.50 (as on 4 October 2021), with lower double-digit upside potential based on 1.13x Price/NTM Book Value (approx.) on FY21E Book Value Per Share (approx.).

Globalworth Real Estate Investments Limited

Globalworth Real Estate Investments Limited (LON: GWI) is a FTSE AIM listed real estate entity active in Central and Eastern Europe.

Investment Rationale – BUY at EUR 6.00

• The economic activity is now expanding, and thus, GWI expects to pursue its expansion plans in Poland and Romania.
• The Group appeared confidence about the medium and long-term prospects of the office market.
• GWI has a strong portfolio value, strong asset management, and decent dividend yield to deliver significant value for its shareholders.
• As per valuation metrics, EV/EBITDA, and Price/Book Value multiples of the Globalworth Real Estate Investments Limited are currently lower as compared to the corresponding multiples of the Financials industry.
• From a technical standpoint, 14-day RSI (~48.20) reflects that it still close to the oversold zone and supporting the upside potential.

Risk Assessments

• The lower occupancy in portfolios can impact the Company’s operating income.
• The market conditions are expected to remain challenging as new COVID-19 variants are emerging.
• The likelihood of China Evergrande’s debt default risk poses a systematic risk to the financial and real estate markets.
• The anxiety over interest rates increase with a rise in US Treasury Yields can extend sell-off in the short-term.

Interim Results (for the six months ended 30 June 2021, as on 21 September 2021)

 (Source: Company Website)

• The Group reported a leasing transaction of 194,000 square meters (sqm) with 122 tenants during H1 FY21.
• The contract renewals represented 57.3% of total leasing activity in H1 FY21.
• The total combined portfolio value increased by 1.3% to €3.1 billion as of 30 June 2021.

One Year Share Price Chart

(Data Source: Refinitiv, Analysis by Kalkine Group)

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

Conclusion

For H2 FY21, the primary focus of GWI will be the active management of portfolio of high-quality properties, so that the Company is able to quickly if new attractive opportunities become available. During the H1 FY21, the Company also acquired two light-industrial facilities in the western part of Romania for €17.9 million. Also, GWI’s portfolio is growing with new additions since its inception, while the Company has maintained a stable outlook from major credit ratings agencies. The stock made a 52-week high and low of EUR 7.50 and EUR 4.90, respectively.

Based on the continued strong total capital generation, decent pipeline of new propositions, solid balance sheet, supported by the valuation conducted above, we have given a “BUY” recommendation on Globalworth Real Estate Investments Limited at the closing market price of around EUR 6.00 (as on 4 October 2021), with lower double-digit upside potential based on 1.00x Price/NTM Book Value (approx.) on FY21E Book Value Per Share (approx.).

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level (indicative stop-loss price).

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

*All forecasted figures and Peers/ Industry information have been taken from Refinitiv.

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

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