AMP Limited

AMP Details

Change in Shareholding: AMP Limited (ASX: AMP) is a wealth management firm with a portfolio of businesses providing superannuation & financial advice, pensions, banking, and investment products in New Zealand and Australia. AMP operates AMP Australia (Australian wealth management and AMP Bank), New Zealand wealth management and AMP Capital. On 18 August 2021, AMP Limited and its controlled entities increased the number of ordinary shares from 53.43 million to 53.59 million.  

• On 17 August 2021, Harris Associates L.P. and its associated entities notified a decline in its voting power from 6.43% to 5.35%.

Dividend Declaration:

• AMP will pay a dividend of $1.1398 on the security AMPP on 16 September 2021 (Record Date: 8 September 2021).
• The company has also declared to pay a dividend of $1.2916 on AMPPA on 22 September 2021 (Record Date: 14 September 2021).

1HFY21 Highlights:

• AMP reported an increase in the Underlying NPAT to $181 million, up by 57% YoY in 1HFY21, primarily due to robust earnings from the AMP Bank and the investment income from the Group Office.
• The total assets under management (AUM) and administration increased by $1 billion to $256 billion as of 30 June 2021.
• AMP recorded a decrease in the net cash outflows of Australian wealth management business to $2.7 billion in 1HFY21 versus $4 billion in 1HFY20.
• AMP Bank’s total loan book rose by 1.9% to $21 billion in 1HFY21.
• The Underlying ROE rose from 6.0% in 1HFY20 to 8.3% in 1HFY21.
• AMP has $452 million of surplus capital above its target requirements on 30 June 2021.
• AMP has completed an on-market share buy-back of $200 million on 30 June 2021 and cancelled 170.49 million shares.

Demerger Update: AMP is pursuing demerger of its Private Markets business division from AMP Capital to a separate company. Upon the demerger, the existing AMP shareholders will obtain shares in Private Markets in proportion to their current shareholdings in AMP Limited. The AMP Capital’s Private Markets business is expected to be listed on the ASX under the proposed demerger.

Underlying NPAT from 1HFY20-1HFY21; (Analysis by Kalkine Group)

Key Risks: The company faces various financial risks such as interest rate sensitivity, loss in the fair valuation of instruments, excess or tight liquidity and credit risk. Also, uncertainty in the global markets due to the impact of the COVID-19 situation may impact its business operations.

Outlook:

• AMP prioritises demerging the AMP Capital Private Markets business by the end of 1HFY22.
• The company will divest the Global Equities and Fixed Income (GEFI) business, AMP Capital, for a maximum of $185 million per a binding contract with Macquarie Asset Management and as an essential step in planning for the demerger.
• AMP is progressing well to deliver $300 million of yearly run-rate of cost savings by FY22.

Valuation Methodology: Price/ Book Value 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 Recommendation: The stock of AMP gave a negative return of ~5.77% in the past three months and a negative return of ~21.48% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level of $1.037 - $1.770. The stock has been valued using a Price to Book Value based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ mean, considering the drop in fees revenue & net profit in 1HFY21, uncertainty regarding the AMP Capital’s Private Markets demerger, etc. For the purpose of valuation, few peers like Bank of Queensland Limited (ASX: BOQ), Challenger Limited (ASX: CGF), Australia and New Zealand Banking Group Limited (ASX: ANZ), and others have been considered. Considering the current trading levels, increase in Underlying NPAT & ROE in 1HFY21, decent capitalisation, valuation, and associated risks of COVID-19 impact, financial risks, and the cash proceeds likely to receive from the demerger, we give a ‘Speculative Buy’ rating on the stock at the current market price of $1.060, down by ~0.470%, as on 20 August 2021.

AMP Daily Technical Chart, Data Source: REFINITIV 

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

Note 2: Investment decision 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 Valuation has been achieved and subject to the factors discussed above.

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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