AMP FY07 Results

AMP reported an 8 percent increase in profits this morning. Here is Macquarie Research Equities 's view about AMP's FY07 results below. MRE has a $9.48 share price target and an Outperform recommendation on the stock.

AMP Limited (AMP) reported this morning and despite being below consensus Macquarie Research Equities (MRE) remain positive about AMPs medium term outlook. AMP reported a financial year 2007 NPAT of $915 million up eight percent on the previous year, this result was underpinned by a 13% increase in business unit operating margins. Other main points from the report include the announcement of a final dividend of 24 cents per share and that management has deferred a previously planned on-market buyback. In today’s note we focus on the reasons why MRE maintain their outperform recommendation.

With AMPs business centred around Superannuation there is a solid basis for continued growth in funds under management and of new business. This foundation coupled with AMPs ability to keep costs down will ensure that net profits are maintained throughout the short term shocks felt in the Debt and Equity markets. MRE also highlight that AMP does not have any exposure to US Sub Prime Mortgages and CDOs which continues to be a major point of contention for other companies in the financial sector.

For these reasons MRE maintains their outperform recommendation and $9.48 price target. This represents a price increase of over 24 percent from today’s price. For those traders looking to pick up the final dividend of 24c, the yield on the stock at these levels represents a return of over 3 percent and franking of 85%. MRE acknowledge that there is going to be pressure on AMPs price in the near term but they emphasize that at these levels this entry point is attractive in the medium term.