AMP Update

Submitted by Jim Thesiger on 2 May, 2008 - 17:19

AMP has a price target of $8.50 from Australian stock analyst UBS.

AMP Q108 flows stay mixed, tough conditions

Event: Q108 Financial Services division fund flows released:

Net inflows softened in line with tough market conditions. Details: (1) Aust Contemporary WM +5% pcp, still seeing switching from retail super to pensions. Persistency good, but net flows relatively small, perhaps some sequential contribution fatigue and/or lower investor sentiment. Corporate super steady, but some mandate wins are yet to transition (2) Aust Contemporary WP inflows steady at recently higher levels (+54% pcp) (3) Lower net outflows from high margin mature book (4) NZ continues to perform strongly, buoyed by KiwiSaver.

Impact: Slight downside risk to our EPS estimates:

Today's AMP FS flows suggest slight (c2%) downside risk to our FY08E/09E estimates. We have left our forecasts unchanged, however, given still volatile investment markets, with the ASX 200 recovering c5% so far in Q208.

Action: Remain cautious on flows... and FUM:

While today's report only gave flows data for the FS business, we note that other companies have reported FUM/FUMA down c7-15% sequentially in Q108. The bulk of this reflects valuation effects (which have improved so far in Q2), but net inflows are also likely to remain soft in line with investor sentiment. This is likely to drag on FUM growth in CY08E, in our view. AMP may hold up better than system given its relative tilt to super and slightly smaller equities exposure.

Valuation: $8.50 price target and Neutral rating unchanged

PT = SOTP x (1+WACC) - dividends.

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