Last Monday, Prudential and M&G (LSE: MNG) completed their demerger. As a result, M&G now trades on the London Stock Exchange as a member of the FTSE 100. With that in mind, here are five things you should know about the newly-listed company.
Firstly, let’s take a closer look at the business. Essentially, M&G is a savings and investment company whose main goal is to grow its customers’ wealth. Operating in 28 markets, the group serves around 5.5m retail customers and over 800 institutional clients, and at 30 June it had assets under management of £341m. Currently, the company has a market capitalisation of £5.7bn.
Future growth prospects
Looking at company literature and announcements, management appears to be quite confident about the future. For example, on the company’s website, it says: “M&G plc is ideally positioned to capture growth opportunities in an attractive savings and investments market” and “M&G plc will bring a new and differentiated growth story to the savings and investments market.”
And on the day of the demerger, CEO John Foley added: “Independence and our unique business mix mean we are well-positioned to benefit from long-term economic and social trends that offer growth opportunities for many years to come.” Clearly, the company sees growth opportunities ahead.
What I think is particularly interesting here is management is putting its money where its mouth is, so to speak. Since the demerger, the following directors have purchased M&G shares:
CEO John Foley: 100,000 shares
Chairman Mike Evans: 32,000 shares
CFO Clare Bousfield: 14,000 shares
CIO Jonathan Daniels: 100,000 shares
Independent Director Clive Adamson: 4,600 shares
I see this insider transaction activity as a bullish signal. It suggests these directors are confident about the future and see MNG shares as undervalued.
Speaking of valuation, it’s probably still a little too early to get an accurate read on the stock’s P/E ratio. Currently, analysts have an earnings figure of 38.1p per share pencilled in for this year, which puts the stock on a low P/E of 5.7.
However, I’d expect that forecast to fluctuate in the near term as more analysts begin covering the stock. Interestingly, JP Morgan has commenced coverage of the stock with an ‘overweight’ rating. It has a price target of 271p – 25% higher than the current share price.
Finally, turning to the dividend, the group said in a recent report it expects to pay out £465m in dividends for the full year. Now, given that there are 2.6bn shares in issue, that means a dividend of around 17.89p per share. At the current share price, that equates to a prospective yield of a high 8.3%, meaning M&G could potentially be a cash cow. Remember that dividends are not guaranteed though.
All things considered, I think M&G shares look quite interesting right now. The dividend yield is attractive and I like the fact its directors are buying shares.
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Edward Sheldon owns shares in Prudential and M&G. The Motley Fool UK has recommended Prudential. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.