Investing.com -- Prudential (LON:PRU) is reportedly considering various options for its asset management arm, Eastspring, with one possibility being the sale of a minority stake.
As per a Bloomberg report, the company could value Eastspring at around $3 billion, with discussions pointing toward the potential sale of a 30% stake in the business.
The move could lead to a partnership that would help Eastspring expand its focus into areas like private credit and dollar-denominated assets.
UBS analysts have weighed in on this potential development, noting that the estimated $3 billion valuation for Eastspring falls below their own expectations.
In their assessment, the value of Eastspring could range from $3.7 billion to $7.7 billion, based on a sum-of-the-parts analysis.
UBS attributes this disparity in valuation to the consideration that Eastspring also includes a joint venture in India with ICICI Bank, which UBS values between $2.1 billion and $4.1 billion.
Prudential’s asset management business, which includes both internally and externally managed assets, represents a significant portion of the company’s operations.
It includes $142 billion in internally managed assets tied to Prudential's insurance business, $56 billion in externally managed assets, and a 49% stake in the Indian joint venture valued at $48 billion.
Despite the substantial size of Eastspring, UBS analysts flag that Prudential’s overall market value doesn’t fully reflect the high earnings multiple of its asset management division.
In terms of valuation, Eastspring’s earnings multiple is placed between 12.5x and 25.8x, a premium compared to Prudential’s own group earnings multiple, which stands at around 9x for the next 12 months.
UBS suggests that Prudential’s stock price might not be fully reflecting the value of Eastspring’s business, especially given the higher earnings multiples associated with its asset management operations.
Shares of Prudential was down 2.6% at 5:42 ET (10:42 GMT).