Broker snap: Rapid growth expected for Prudential

10th Nov 2010 11:46

Panmure Gordon has retained its 'buy' rating for insurance giant Prudential, with the third quarter statement pointing to "fast and profitable growth".The results for the third quarter show "a strong performance across the board", says analyst Barrie Cornes, with nine-month sales at £2.46bn annual premium equivalent (APE), 24% higher than the prior year period, and in line with consensus. "Specifically, Asia remains the powerhouse with momentum continuing, highlighted by nine-month sales of £1.07bn APE" - an increase of 32% compared with last year - "reflecting record new business sales in each month of the third quarter," Cornes said.New business profit at £621m represents 46% of total new business profit and has been driven by "a focus on writing better margin regular premium business (94% of total).""This is a straightforward set of figures and helps reinforce the strength of the group, particularly in Asia where, despite the AIA 'loss', the company is still delivering in spades."The share price is trading close to the broker's estimated 2010 embedded value of 637p per share. "We believe that following the successful initial public offering of AIA there is an obvious and compelling read across to the valuation of Pru's Asian operation".The broker notes that the current implied valuation of the group's Asian operation is £8.2bn, whereas Cornes believes it is worth "an absolute minimum of £11.8bn".Based on a sum-of-the-parts valuation the broker has a price target of 781p per share.