AMP Limited

AMP Details

AMP Limited (ASX: AMP) business is divided into three areas, which include AMP Australia (wealth management and bank), AMP Capital, and New Zealand wealth management. Also, it holds several important strategic partnerships at the group and business unit levels.

Results Performance for the Period Ended 30 June 2021 (H1FY21)

• Total AUM and administration revenue reported at A$256 billion in H1FY21, up 0.4% YoY, driven by the positive market returns outweighed negative net cashflows
• Australian wealth management AUM grew 6% YoY to A$131.2 billion in H1FY21
• AMP Bank’s total revenue grew 3% YoY in H1FY21 and the net interest margin grew 8 bps from H1FY20 to 1.71%.
• AMP Capital AUM reduced by 1% YoY to A$187.6 billion in H1FY21 and the fee income fell 16% YoY to A$327 million in H1FY21 primarily due to lower AUM, followed by lower performance and transaction fees.

Financial Snapshot (Source: Company Reports) 

Key Update

As per the release dated 16 September 2021, the company has launched a Small Shareholding Sale Facility (Sale Facility) for shareholders who hold below A$500 of fully paid ordinary shares. The facility will facilitate shareholders to liquidate their Small Shareholdings without paying any brokerage costs.

Outlook

In the wealth management sphere, the company plans to upgrade the business with sustaining AUM and continued its focus on the multi-channel advice business. Further, the company plans to scale infrastructure equity and infrastructure debt fund series, across adjacent sectors and geographies.

Guidance for FY21

• Australian wealth management: FY21 margin contraction of 7bps (vs FY20) from pricing and simplification initiatives. H2FY21 to be broadly in-line with H1FY21,
• AMP Bank: H1FY21 loan growth momentum anticipated to extend in H2FY21. Moreover, a competitive lending environment is anticipated to place pressure on revenue margins in H2FY21, partly offset by lower deposit and other funding costs
• AMP Capital: FY21 earnings are anticipated to be lower than FY20 due to lower average AUM from cash outflows reducing AUM-based revenues in H2FY21.
• New Zealand wealth management: FY21 earnings anticipated to be at similar levels to FY20

Key Risks

The financial risk of the company includes market risk (interest rate risk, currency risk, equity price risk), liquidity and refinancing risk, and credit risk. Also, the performance of the company is exposed to COVID-19 related circumstances and the significant transition that is occurring within the business environment.

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

Technical Overview:

Daily Price Chart

Source: REFINITIV, Note: Purple colour line reflects Relative Strength Index (14-Period)

Stock Recommendation

The stock posted 6-months and 1-year returns of ~-22.64% and ~-23.79%, respectively. It is currently trading below the average 52-week high price of $1.77 and 52-week low price of $0.885.

The stock has been valued using a Price/Book Value multiple based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight discount to its peer’s average, considering a decrease in EBITDA margin at 2.7% in H1FY21 versus 5.3% in H1FY20 and the uncertainty of AMP Capital’s Private Market demerger.

Considering the aforementioned factors, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.013 per share, (Time: 4:00 PM (GMT+10), Sydney, Australia), as of 1^st October 2021.

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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