UBS: Fast Take: M&G Plc "PruFund launches on Scottish Widows' FNZ platform" ..."

研报英文原文证据摘录

UBS: Fast Take: M&G Plc "PruFund launches on Scottish Widows' FNZ platform" ..."

Forecast returns

Forecast price appreciation -3.8%

Forecast dividend yield 6.8%

Forecast stock return 3.0%

Market return assumption 9.2%

Forecast excess return -6.2%

Company Description

In October 2019 M&G listed on the LSE as a separate company following its demerger from

Prudential Plc. It has total AUM of £370bn with 5m retail customers and 800 institutional

clients. M&G provides retirement income, savings and investment solutions for both retail and

institutional clients in the UK. M&G also operates its Asset Management businesses in Europe

and Internationally.

Valuation Method and Risk Statement

M&G: Our valuation for M&G is based on the discounted value of distributable capital

discounted. We believe this is a better measure than a dividend discount model given some

capital may be retained for growth/M&A. We use a SOTP valuation for M&G based on cash

flows expected from different segments of the company discounted at the same discount

rate.

Investors in M&G are exposed to a wide variety of risks: regulatory and taxation changes,

equity downfalls, credit downgrades and defaults, falling interest rates and inflation.

Although we reflect these risks in our CoE, an increase in these risks or their outlook could

lead us to increase our assumed CoE and reduce our valuation. The main market risk for M&G

is equity risk given its exposure to fee-based business through its asset management, savings

and some of its insurance segments. Additionally, like other UK life insurers, M&G is exposed

to credit default and downgrade risk which is the main tail risk for the sector but given this

part of M&G’s business is in run-off, we should see a gradual reduction in credit risk. M&A