Midas: Pru & Mama

By JOANNE HART
Updated:

 

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Remember the Man from the Pru, the salesman who would flog life insurance door-to-door? That was the old-style Prudential, the well-known, well-established insurer with a strong British bias. Nowadays, the company is very different.

It has ditched its Man because he was too expensive to maintain. Instead, it has moved with the times, selling annuities, pensions, bonds, investment products, health insurance and even equity release policies. It also owns the fund management business M&G and has developed a substantial overseas presence in America and Asia.

The Asian business is particularly exciting. The group operates in 13 markets across Asia, including fast-growing countries such as China and India.

Most people in the region are committed to saving and this gives Prudential a distinct advantage. Not only is it operating in countries where living standards and disposable incomes are rising rapidly, but there is an almost innate enthusiasm for investment products.

In the US, the group owns Jackson Life, a leading life insurer that prides itself on providing effective advice and savings products for people who are thinking about their retirement.

Prudential's UK operations have worried City analysts for some years but the company has taken steps to address concerns. It sold Egg, the loss-making internet bank, and it has streamlined overseas

Traded on: Main market Ticker: PRU the rest of the UK business, cutting costs and moving away from less profitable parts of the savings industry.

The share price has slipped in recent weeks amid fears that volatile stock market conditions and the uncertain economic environment could have an adverse affect on the company. This may be the case in the short term, but this business is fundamentally sound and well-managed by chief executive Mark Tucker.

In the UK and the US, people are living longer and there is an increased need for savings products. In Asia, people are growing richer and there is an increased demand for such products.

Operating profits are forecast to rise from £1.9bn in 2006 to more than £2.5bn in the year just ended and up to £2.9bn in 2008.

Midas verdict: Prudential shares ended 2007 at 712p and are now trading at 59612p. They deserve to go higher and some brokers believe they should rise to more than £10. Buy.

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I predict a profitable story

Mama Group is a music firm with a difference.

While big music groups moan that CD sales are diving as under-25s beg, borrow or steal songs from the net, Mama is embracing the new era. The company has three broad divisions. It owns live venues including the Apollo, the Jazz Cafe and the Mean Fiddler in London, as well as a chain of smaller, regional venues called Barfly.

This business sees two million people a year coming through the doors, delivering about £20m of turnover.

Mama also manages about 100 acts, including Kaiser Chiefs and Franz Ferdinand. And it is involved in concert tickets and merchandise, such as T-shirts. Joint chief executives Adam Driscoll and Dean James point out that they are not in the business of selling CDs but making money from the relationship between musicians and fans.

People are listening to more music and going to more live gigs than ever, but they are no longer prepared to pay £10 or more for a CD.

So Mama makes its money from the other income streams associated with the music industry. It even helps bands to distribute their music on the internet. Mama reports figures tomorrow and analysts expect profits of about £2 million for the year to the end of last July. Next year's profits should be substantially higher.

Midas verdict: Mama shares are 434p, having hovered around 5p for months. But Driscoll and James spent 80 per cent of their net pay buying the shares this year.

Their story is compelling. Buy a few and watch this space.

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