Prudential (LSE: PRU) (NYSE: PUK.US) has weathered the emerging markets crisis in relatively good shape. Here are five ways it could make you rich.
1) Delivering on its promises
The Prudential share price is up a mighty 250% over the past five years, a fitting reward for chief executive Tidjane Thiam’s relentless pursuit of the emerging Asian middle class. After fluffing his lines over his £36 billion attempt to buy AIA Group in 2010, his subsequent performance has been flawless. He said the Pru would double its 2009 operating profit and deliver more than £300 million of net remittances by the end of 2012, and did it. He hit two stiff targets for the US-based Jackson life insurance business, one for UK remittances, and best of all, fulfilled his promise to double the Pru’s Asian new business profit by the end of 2013. I like a man who keeps his promises.
2) Keeping up the momentum
Thiam recently set out three new pledges to 2017, as he looks to boost returns in “fast-growing sweet spot markets”. The first is to more than double cash generation in Asia, from £484 million last year to between £900 million and £1.1 billion. The second is to boost life and asset management profit in Asia by 15% a year to 2017. Finally, he aims to generate £10 billion of cash across the group by the end of 2017, roughly third of the Pru’s current near £32.26 billion market capitalisation. If he delivers on his promises again, shareholders will be a lot wealthier.
3) Growing on all fronts
Prudential’s aggressive growth strategy should see it breaking new ground in Saudi Arabia, Myanmar, Cambodia, Ghana and Poland. But it isn’t abandoning its mature markets, notably the US and UK, where an ageing population should bolster demand for its pension, investment and insurance products. The company has massive opportunities both in young markets, and old ones.
4) Showing its staying power
While some FTSE 100 companies with major emerging markets exposure have stumbled in recent weeks, Prudential has held fairly steady. Longer-term investors, such as myself, won’t be bounced out of the company’s strong growth prospects by a bout of market turbulence. Our resolve has been stiffened by a slew of positive broker reports. Societe Generale’s recent move to restate its ‘buy’ rating only confirmed what we already knew.
5) Delivering on these numbers
Prudential may looks fully priced at 16 times earnings, until you check out its strong growth forecasts. Earnings per share are forecast to rise a hefty 19% in 2014, and a further 11% in 2015. Pre-tax profits are forecast to grow a total of 25% in the two years to December 2015. Thiam has proved a man of his word, and that gives me faith in these forecasts. Holding Prudential’s shares has helped make me wealthier over the past few years, and I’m banking on more of the same.
