Prudential shares sank on Wednesday despite the group posting strong 2023 results boosted by reopening the border between Hong Kong and the Chinese mainland.

New business soared 45% to $3.1bn, and annual premium sales jumped 37%. There’s a lot to like in the group’s full-year results.

However, Prudential’s strong results did little to lift the mood among investors who are still clearly concerned about the risks to China’s economy and what they mean for the immediate outlook.

“The whole idea behind Prudential’s pivot east was to benefit from the growth opportunities in less mature insurance and savings markets in Asia and Africa,” said AJ Bell investment director Russ Mould.

“However, the recent sticky patch for the Chinese economy has undermined the business and, to an even greater degree, sentiment towards it.”

Prudential shares were down 6% at the time of writing and were trading at the lowest levels since the beginning of the pandemic. While 2023 results were robust, what happens next is less clear.

The company said they remain confident in meeting their 2027 targets of 15% – 20% new business compound annual growth from 2022 levels and double-digit compound annual growth in operating free surplus from insurance and asset management businesses.

However, the group’s outlook section of the results was brief and provided little insight into what happens next year. This may have put investors off, given the uncertainty around China.

“Despite analyst price forecasts being significantly higher than the current price, it would appear that The Pru still has some work to do in convincing investors that the prolonged downtrend is reversing,” said Mark Crouch, analyst at investment platform eToro.

“Prudential still has significant exposure to China and their share price dropped by a quarter in 2023, currently sitting at a key area of support that also marked the COVID lows.”

Prudential shares are attractive at these levels for those optimistic about China’s outlook, however difficult that may be. The forward earnings multiple is around 10x and offers value.

The company increased the full-year dividend by 9%. Prudential yields around 2%.

Tekcapital’s portfolio company Guident is seeking to accelerate its growth strategy through a US funding round.

In a UK Investor Magazine interview released yesterday, Tekcapital’s CEO, Dr Clifford Gross, outlined plans for Guident to pursue a private equity funding round.

Guident has engaged a US investment bank to facilitate the capital raising which is expected to provide an uplift to Guident’s current valuation.

Tekcapital has historically provided Guident with growth capital from its own capital. Should Guident complete this round as a privately held completely, with Tekcapital as the controlling shareholder, it will alleviate the requirement for Tekcapital to provide Guident with growth capital.

After MicroSalt was listed in February, Guident is the only current portfolio company privately held, with MicroSalt, Innovative Eyewear, and Belluscura, promising multi-million-pound revenue in 2024 to support their respective growth strategies.

Of the £2m recently raised by Tekcapital, £300,000 was allocated to Guident’s new headquarters, which will be launched in April. Should the US private equity round be successful, this may be the last cash injection from Tekcapital.

The funding round is expected to be completed in about three months and would mark a major milestone for the autonomous vehicle safety company.

Guident has developed a software-as-a-service (SaaS) model and secured its first contracts providing recurring revenues from its Remote Monitoring and Control Centre (RMCC) services. SaaS companies tend to attract higher valuations due to the visibility of future revenues.

Last year, Guident spun out its regenerative shock absorber technology into a new entity, ReVive Energy Solutions, with the aim of maximising the value of the technology and creating the opportunity to secure growth capital specifically for the progression of regenerative shock absorber IP.

Tekcapital said the Guident had conducted successful tests with a tier-one tyre company, yielding positive results. Further announcements are expected this year.

The FTSE 100 was range-bound on Tuesday as the index traded within a tight range ahead of major central bank meetings this week.

Investors held off making big bets opting to wait for the next instalments from the Federal Reserve and Bank of England meetings later this week. Neither is expected to cut rates and all eyes and ears will be on economic projections and hints of when the central banks’ will move to cut rates.

Markets are increasingly pricing June as the earliest date for the Federal Reserve to reduce borrowing costs, and it’s less clear when plotting the BoE’s course.

The Bank of England and Federal Reserve are moving in a different direction to the Bank of Japan who hiked rates last night sparking a rally in the Nikkei that helped European stocks to a stronger start.

“Just as the Bank of Japan finally gets around to raising interest rates, investors are still hoping that the US Federal Reserve will cut them, although the first reduction is now seen coming in June and not at the latest meeting in March, as markets had thought at the start of the year,” said AJ Bell investment director Russ Mould.

“Chair Jay Powell and his colleagues on the Federal Open Markets Committee are therefore moving more slowly than markets had expected and the consensus forecast now is the Fed will cut rates just three times to 4.75% by year end, rather than six times, and that is because US inflation is proving more resilient, and inflation stickier, than expected.”

The FTSE 100 was up just 3 points at the time of writing.

Unilever

Unilever was the FTSE 100’s top gainer, with a rise of 3%, following the release of an accelerated action plan that included disposing of its ice cream business and cutting 7,500 jobs. Unilever has been under pressure to boost performance, and slimming down its core business to four units with the ice cream operating as its own entity is the proposed course of action.

“Unilever says bye-bye to Ben & Jerry’s with its plans to ditch the Ice Cream unit. The company has hinted at a demerger, but all separation routes remain on the table at this stage as it looks to maximise shareholder value. At the same time, there’ll be a new cost-cutting programme over the next three years that aims to more than offset the impact of losing Ice Cream. All-in, these changes are expected to help drive mid-single-digit sales growth, an improvement from current targets of 3-5%, with margin expansion too,” said Matt Britzman, equity analyst, Hargreaves Lansdown.

“Action is what shareholders wanted to see from the new team at the top, and that’s what’s been delivered today. Ice Cream always looked like the odd one out when you compare it to other product lines, and performance has struggled of late. It’s not a huge shock to see this move, but it’s something prior management wasn’t able to deliver. Unilever’s not an overly expensive name at the minute so expect markets to react positively to the news, perhaps more due to the decisive action than anything else.”

Unilever shares jumped on Tuesday after the consumer staples company announced plans to emerge its Ice Cream business and cut 7,500 office-based roles globally.

Investors have long awaited a strategic action plan to boost the company’s profitability and that was delivered today in the form of the acceleration of its Growth Action Plan (GAP) announced last designed to streamline the business and reduce costs.

Unilever shares were 3% higher at the time of writing.

There are no concrete plans for the demerger which is expected to be completed by the end of 2025, however, a separate listing is a likley option.

After the demerging of the Ice Cream business, Unilver will operate four business units; Beauty & Wellbeing, Personal Care, Home Care and Nutrition.

“When the market was speculating about steps Unilever might take to revive its fortunes, a spin-off of its ice cream division had not been that widely discussed – even if political pronouncements from Ben & Jerry’s had provoked a meltdown among some investors,” said Russ Mould, investment director at AJ Bell.

“A side benefit of the brand exiting Unilever’s portfolio is it might quieten the ‘go woke and go broke’ noise but more widely the reasoning for the decision looks pretty sound. 

“It costs the company more to sustain the ice cream business, there is a different supply chain because it is dealing with frozen goods and it’s more seasonal than the company’s other roster of brands.

“A demerger and separate stock market listing for the ice cream arm is seen by Unilever as the most likely outcome with a fairly tight deadline of the end of next year set by the company. Less than a year into his tenure, CEO Hein Schumacher is certainly making his mark on the group.”

The slashing of the payroll to the tune of 7,500 will be completed over a three year period. The restructuring is thought to cost 1.2% of global turnover over the period.

Yü Group shares were firmly higher on Tuesday after the utilities company posted bumper 2023 results and provided an outlook that lays the foundations for further growth in the coming years.

Yü Group profits ballooned in 2023 as the business-focused utilities supplier’s revenue jumped 65%, and contracted revenue for 2024FY rose to £520m.

By all accounts, Yü Group’s 2023 results were nothing short of spectacular.

Increased customer numbers drove a whopping 439% increase in adjusted EBITDA to £42.6m, up from £7.9m in 2022. EBITDA margin exploded to 9.3% in 2023 from 2.8% in 2022.

Speaking with UK Investor Magazine shortly after the results were released on Tuesday, Yü Group CEO Bobby Kalar said EBITDA margins were expected to ease back next year but remain in the 7%—8% region—significantly higher than in 2022.

The company’s smart metering installations surged to 8,300 during the year, and the group said it is targeting 25,000 installations by the end of 2024. The company currently has a 1.4% market share of a £50 billion market, up from 1% in the prior year. Kalar said he expects market share to grow double digits each year in the medium term.

Although Yü Group shares have soared in recent years, the company is still undervalued compared to sector peers. Given the wave of takeovers of UK companies, we asked CEO Bobby Kalar if he was concerned the company may become a takeover target with earnings set for further growth in the future.

After today’s results, Yü Group trades at an EV/EBITDA multiple well below that of sector peers that have attracted suitors. In response, Kalar said that while a takeover approach is a concern for the ‘entrepreneurial’ company, as the founder and holder of 51.8% of the group’s shares, he remained committed to pushing forward with the company’s growth strategy as a publicly traded entity.

Yü Group shares were 5% higher at the time of writing on Tuesday.