Broker snap: UBS highlights Prudential's Asian strength

19th Apr 2012 11:22

UBS has reiterated its buy rating for insurance group Prudential, saying its division Prudential Corporation Asia (PCA) compares favourably to pan-Asian life insurance rival AIA due to its structural advantages.The Swiss broker says that PCA's exposure to Indonesia should drive returns in the medium term, while its less mature book implies structural higher ROEVs (return on enterprise values) and more rapid profit growth in the longer term. "A stronger bancassurance platform and richer product mix have enabled PCA to grow its top line more rapidly than AIA while expanding margins," UBS said.As for the Prudential group as a whole, the broker expects it to have achieved its Asian growth targets and expected cashflows by the end of 2012. "This would give PCA the option to service its own capital base, perhaps via demerger," the broker speculates.Furthermore, UBS thinks that the achievement of these targets will see management get closer to the two times dividend per share (DPS) cover guidance and the broker has now raised its 2013-15 DPS estimates by 20%."Pru is trading in line with UK peers using traditional metrics, which is anomalous given its Asian exposure." UBS raises its target price from 800p to 875p.Shares were performing well on Thursday morning, trading up 2.02% at 756.5p before midday.BC