Prudential PLC (LON:PRU) remains in favour at Credit Suisse, with the Swiss bank seeing several share price catalysts coming over the horizon.
These catalysts include the demerger of Jackson National in the US, a potential fundraising of up to US$3bn of equity capital and a likely debt reduction of US$2.5bn.
Credit Suisse (CS) notes that the timing of the demerger of Jackson National (JNL) is uncertain but management is sticking with its assertion that it will take place this year.
“Despite the potential negative overhang in the stock, we note that our Prudential SOTP [sum of the parts] values JNL at US$2bn,” CS said.
Prudential shares currently trade at 1,532.5p but CS's SOTP-based valuation is 1,750p, which admittedly assumes the Pru gets the US$2bn for Jackson that the bank thinks it should.
“We also highlight the increased M&A [mergers & acquisitions] activity in the US life insurance market for ‘closed blocks’, with Athene, for instance, acquiring a stake in Jackson last year as part of its strategic partnership,” it added.
CS expects Prudential to raise equity capital of US$3bn, which is at the upper end of its guidance, with investors in Hong Kong (HK) said to be very interested.
“This might dilute some existing shareholders but we believe an increase in liquidity for the shares in HK would be in line with the company’s aim to increase its investor base in Asia,” CS said.
The Swiss bank has an ‘outperform’ rating for Prudential.