AMP Limited

AMP Details

Share Buy-Back: AMP Limited (ASX: AMP) is an asset management company that gives financial advice through digital, online, and phone channels and provides life insurance, superannuation, pensions and other financial services in Australia and New Zealand. The market capitalisation of the company as of 25 June 2021 stood at ~$3.98 billion. As per a recent announcement, the company has buy-back its 3,535,589 shares for a total consideration of $4,095,979.86 

Q1FY21 Financial Performance:  For Australian wealth management, the company has recorded an increase in AUM by $1.6 billion to $125.7 billion in Q1FY21. AWM has reported a decline in Cash outflows of $6.7 billion in Q1FY21 against $7.6 billion in Q1FY20. 

AMP Bank has grown in total loan book by $0.2 billion to $20.8 billion in Q1FY21. However, AMP Bank recorded a decline in total deposits by $0.1 billion to $16.0 billion in Q1FY21. AMP Capital has mentioned a reduced AUM by 1.7% to $186.5 billion in Q1FY21 from $189.8 billion. In addition, AMP Capital reported net cash outflows of $1.3 billion in Q1 21, driven by fixed income outflows as well as planned divestment of assets.  

Australia Wealth Management Performance (Source: Company Reports)

Outlook: The company is focused on cost management to drive returns to shareholders. A 'home loan repayment pause program' was available to support the client, which might positively impact the company's goodwill. 

Key Risk: Due to the COVID-19 pandemic, the company had a significant impact on its financial, operations and still, uncertainty prevails. Any delays in regulatory approvals may lead to financial losses.  

Valuation Methodology: Price/Book Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group 

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendations: As per a recent announcement, the company has appointed Michael (Mike) Hirst as an independent, non-executive director, effective 1 July 2021, and Shawn Johnson will serve as Chief Executive Officer (CEO) of AMP Capital. AMP has decided to distribute a dividend of $0.9041, payable on 22 September 2021. As per ASX, the stock of AMP is trading below its average 52-weeks' levels of $1.050-$1.965. The stock of AMP gave a positive return of ~11.50% in the past one month and a negative return of ~28.40% in the past one year. We have valued the stock using a P/B multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount to its peer median P/B (NTM trading multiple), considering a decline in assets under management (AUM) in AMP Capital, prevalence of COVID-19 pandemic and increase in Debt-to-Equity Ratio. For this purpose, we have taken peers such as Challenger Ltd (ASX: CGF), QBE Insurance Group Ltd (ASX: QBE), to name a few. Considering the expected upside in valuation and current trading levels, resilient financial performance during first quarter, increase in loan book and increase in AUM in wealth management vertical, we recommend a 'Buy' rating on the stock at the current market price of $1.183, up by 1.98% (as on 25 June 2021, 12:57 PM (GMT+10), Sydney, Eastern Australia). 

AMP Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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