Today I am explaining why developing regions should blast revenues at Barclays (LSE: BARC) (NYSE: BCS.US), Ashmore Group (LSE: ASHM) and PZ Cussons (LSE: PZC) through the roof.
Bank on resplendent returns
Global banking goliath Barclays grabbed the headlines this week with the shock departure of chief executive Antony Jenkins. Concerns over the breakneck pace of restructuring, particularly at the controversial Investment Bank, is thought to have pushed the firm’s head overboard. Indeed, just today Sky News reported that Barclays has put its Italian and Portuguese retail assets on the block.
With the bank’s downscaling in nearby regions naturally drawing investor attention, Barclays’ success across the lucrative regions of Africa has become overlooked more recently, and to a lesser extent its more modest footprint in Asia. The company provides services to more than 14 million customers in a dozen countries on the continent, including regional powerhouses South Africa and Egypt.
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Barclays saw income from its Africa Banking division leap 8% during January-March, a result that propelled pre-tax profit almost a quarter high to £295m. Barclays has rising personal income levels and historically-low financial product penetration across the region to thank for this performance, and is consequently ramping up its operations to latch onto these factors — the British firm bought a controlling stake in Kenyan insurance provider First Assurance just last month.
Financial flows ready to charge
Extreme volatility on the Chinese stock market — not to mention the worsening financial plight of Greece — is once again casting doubts on the strength of investor appetite looking ahead. Indeed, significant macroeconomic worries has weighed on the performance of financial services plays like Ashmore Group in recent times, particularly those geared towards developing markets such as the London business.
Still, I remain convinced by the investment potential of these markets in the long-term, and consequently the revenues potential of Ashmore. Although the company’s latest trading statement today revealed a $2.2bn dip in assets during April-June, to $58.9bn, Ashmore noted that emerging markets ‘performed well‘ compared with established territories. And as chief executive Mark Coombs noted, once the Federal Reserve’s actions become clearer, client activity is likely to lift as sentiment towards these new markets improves still further.
Don’t leave this stock on the shelf
Household goods specialists PZ Cussons are certainly betting big on these exciting territories, the business having recently bulked up its presence in these destinations still further. And with good reason: research house McKinsey & Company estimated recently that consumption in developing regions will hit $30tn within a decade, galloping from just $12tn in 2010.
The company hoovered up health food brand five:am last August, and since then has embarked on a variety of product introductions, like that of baby food label Rafferty’s Garden in China and New Zealand. Broadly speaking Cussons continues to enjoy strong sales expansion across Asia and Africa, and in particular its regional growth hub of Indonesia. And boosted by a string of hot brands like Carex soap and Yo drinks, I believe revenues should keep on charging higher.
