Phoenix Group Holdings PLC
Phoenix Group Holdings PLC (PHNX) is the largest closed life fund consolidator in the UK with £226 billion of assets under administration and 10 million policyholders post the Standard Life Assurance acquisition. Phoenix has five operating life companies: Phoenix Life, Phoenix Ireland, Sunlife, Phoenix Wealth and Standard Life. The Group has two principal management services companies: Pearl Group Services Limited (PGS) and Pearl Group Management Services Limited (PGMS). The management companies provide administrative services to the life companies mostly through the outsourcing arrangements.

Financial Highlights (FY 2018, £million)

(Source: Annual Report, Company Website)

The Group has made an operating profit of £708 million (2017: £368 million). The increase in operating profit was mainly determined by the inclusion of Standard Life Assurance businesses. The profit before finance costs and tax attributable to owners was £553 million (2017: £76 million). The company’s profit after tax attributable to shareholders stood at £410 million (2017: negative £27 million). The increase in profit after tax attributable to owners was primarily reflected by the increase in an operating profit. In FY 2018, the cash generation by the operating companies stood at £664 million (2017: £653 million). The company has delivered £1.3 billion of cash generation in 2017 and 2018, beyond the upper end of its 2-year cash generation target range of 1-1.2 billion pounds.

Share Price Performance

Daily price chart as on April-11-2019, before the market close. (Source: Thomson Reuters)

On 11th April 2019, at the time of writing (before the market close, GMT 11:10 AM), shares of PHNX were quoting at GBX 699.65 and up by 1.02% against its previous day close. During the last one-year, shares have reached to a 52w high of GBX 740.51 and a 52w low of GBX 536.72.

Valuation Methodology


Conclusion
The company faces considerable execution risk surrounding the Standard Life Assurance Limited (SLA) acquisition with lower-than-expected benefit and increased regulatory intervention, leading to a higher-than-expected review and rectification costs.Another major risk the company faces includes the higher-than-expected expense ratio due to fixed cost inflation or a breakdown in the relationship with key outsourcing partners, leading to higher expenses and lower cash generation. Phoenix reduces dividends per share year-on-year due to lower-than-expected cash generation and higher capital constraints. Given the backdrop of macroeconomic uncertainty during the Brexit, the board intends to maintain the depth and breadth of experience required to continue delivering stockholder value and improving client outcomes. Going forward, the company will face operational or structural challenges which will impact shareholders value. Phoenix has relatively modest macro exposure given the closed, de-risked nature of its back-book business. The company’s business is regulated in the UK where there is high scrutiny on business conduct. Based on the above factors we recommend investors should “Avoid” the Phoenix Group Holdings Plc stock at the current levels.

Hargreaves Lansdown PLC
Hargreaves Lansdown is a provider of investment management products and services to private investors in the UK. It offers a range of investment products, investment services, financial planning and advice. Its flagship service, Vantage, is a direct-to-private investor fund and wrap platform which enables clients to hold and manage their investments, including unit trusts, open-ended investment company, equities, bonds, investment trusts and cash irrespective of the tax vehicle. The Company also provides investment management, independent financial advisory and stock broking services to the private investors and advisory services to companies in respect of group pension schemes. In addition to offering externally managed investment products, it manages funds through its own range of multi-manager funds and Portfolio Management Service.

Financial Highlights (H1 FY2019, £)

(Source: Interim Reports, Company Website)
The net new business for the first half of FY2019 was reported at £2.53 billion, a decrease of 24% over the last year as a result of uncertainty regarding Brexit, significant decline in the UK investor confidence and net retail outflows across the market. However, the company added 45,000 net new clients, taking its total active clients to 1,136,000. The assets under administration also declined marginally over the year to £85.9 billion. At 93.5%, the client retention rate has remained very high. The total net revenue for the period increased by 9% to £236.4 million against £216.4 million in H1 FY18. Driven by the company's positive trading performance, diluted EPS rose by 4% to 26.1p from 25p in H1 FY18. The management announced an interim dividend per share of 10.3 pence, an increase of 2 per cent against the last year.
Share Price Performance

Daily price chart as on April-11-2019, before the market close. (Source: Thomson Reuters)

On 11th April 2019, at the time of writing (before the market close, GMT 1:05 PM), shares of HL. were quoting at GBX 2,091 and up by 1.75% against its previous day close. During the last one-year, shares have reached to a 52w high of GBX 2,272.17 and a 52w low of GBX 1,622.

Key Risks
The company is subject to Brexit uncertainties which may affect its overall performance. The implementation of BREXIT may impact the country’s economy in a negative direction. It would also affect the exports and imports, legal and political environment, foreign direct investments in the country, which in turn may affect the UK investment industry. Being an investment company based in the UK, its performance may get impacted. The group may face various operational risks such as regulatory issues, business disruption, financial crime, fraud, information security and data protection issue, IT issue, and human resource issue. HL may also face financial risks such as market risk, prudential risk, fluctuation in interest rates, liquidity risk, and bank default risk.

Conclusion
Although the company’s profitability margins increased slightly in the latest reporting period, the business environment does not augur well for its performance.The geopolitical and economic uncertainties in the United Kingdom as well as abroad has caused significant volatility in the market. Improved cost efficiency, quality customer services, and improved asset management services are a few of its key strengths. The Brexit implication, stiff competition, and operational risks may affect the growth of the company. Based on the above factors we recommend investors should keep a cautious Watch approach on the Hargreaves Lansdown Plc stock at the current price of GBX 2,091 (as on 11^th April 2019).

Standard Life Aberdeen PLC
Standard Life Aberdeen PLC (SLA) is a British global asset manager, headquartered in Scotland, United Kingdom. The Company offers a wide range of developed and emerging market equities and fixed income, multi-asset, real estate, and alternatives products and solutions. Total assets managed and administered globally over GBP 550 billion. Business operations spread across 54 locations globally and employ a workforce of around 6,000 people. The company has two operating segments: Asset management & platforms and Insurance associates & joint ventures.

Financial Highlights (FY 2018, £million)

(Source: Annual Report, Company Website)

The group’s adjusted profit before tax stood at £650 million, against £660 million on pro-forma basis in 2017. Fee-based revenue reduced by 11% to £1,868 million in FY 2018 over the last year, due to net outflows in 2017. Adjusted diluted EPS increased to 17.8p in FY 2018, from 17.2p in 2017, while diluted EPS (including discontinued operations) decreased to 29.1p per share (FY17:29.6p). Because of net outflows of funds and unfavourable movement in the market, AUMA declined by 9% to £551.5 billion. The primary decline was in equities which was impacted by investors sentiment and investment performance concerns as well as market movements. The management proposed a final dividend per share for FY18 of 14.3 pence, taking the annual dividend per share to 21.6 pence. IFRS profit after tax attributable to equity holders (including discontinued operations) rose by 19% to £830m, driven by a profit on the sale of the insurance business.

Valuation Methodology


Share Price Performance

Daily price chart as on April-11-2019, before the market close. (Source: Thomson Reuters)

On 11th April 2019, at the time of writing (before the market close, GMT 2:35 PM), shares of SLA were quoting at GBX 264.50 and down by 4.13% against its previous day close. During the last one-year, shares have reached to a 52w high of GBX 380.63 and a 52w low of GBX 208.85.

Conclusion
Although the global economic growth is slowing and pulled down by declining growth in China, several economic indicators are not currently signalling imminent recession, with a positive view held by many central bankers and governments.This augurs well for the company as its operations are heavily dependent on economic growth. Standard Life's pensions and life business in the UK is one of the largest pensions, long-term savings and investment products providers in the country. Going forward, the group is expected to sustain its strong market position. The company has moved responsibilities to Dublin and Luxembourg office to prepare for hard-Brexit. Based on strong financials supported by encouraging costs cutting measures and merger synergies, and the valuation done using the above method, we have given a “BUY” recommendation at the closing price of GBX 275.9 (as on 10th April 2019) with single-digit upside potential based on 14.9x NTM Price/Earnings (approx.) on FY19E earnings per share.
 
*All forecasted figures and peers have been taken from Thomson Reuters.
*The buy recommendation is valid for the current price as covered in the report (as on April-11-19).

Disclaimer
PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.
References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.
This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.
The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.

Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser. Our publications are NOT a solicitation or recommendation to buy, sell or hold.