AMP

Here is an update on the Australian Wealth Management (AUW) provided by Australian market analyst UBS.

Australian Wealth Management (AUW) Markets impact Q108 FUM, Q2 looking flat

Retail FUM down 9% in the quarter:

AMP (AMP) remained MRE’s preferred low risk, large cap wealth management exposure from Australian stockmarket analysts from Citi.

AMP (AMP): A Super Chance to Buy for Growth

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:

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.

Macquarie Research Equities (MRE) have put out an interesting update about upcoming release of the AMP 2007 Financial Year results tomorrow. Note that AMP remains MRE's preferred wealth management exposure. They note down their forecasts and the key points that they are looking for in that result release:

Sharemarket analyst Macquarie Research Equities have provided a 2007/2008 Australian Budget Impact statement. Investors who had been eagerly awaiting the release of the 2007-2008 Budget were last night greeted with a host of initiatives that included a significant boost to household disposable income.

AMP remains the preferred exposure to the Australian Insurance industry from sharemarket analyst Macquarie Research Equities. Last week, the CEO of AMP, Andrew Mohl, presented at Macquarie's Australian Leaders Conference. In the analyst's view the industry is poised for very strong and low risk growth over the next decade. Key points to emerge from the conference presentation included: The robust growth outlook in all key super segments; The business transformation that has taken place since 2003. Some of the highlights include growth in business profits relative to investment income, contemporary product earnings relative to mature businesses, significant increase in Assets Under Management ($122bn from $76b in 2003), dramatic improvement in the cost to income ratio (76bp from 107bp in 2003) and the considerable improvement in ROE (31% from 18.1% in 2003). At the same time, AMP released its 1Q07 cashflow figures. Gross and net cashflows increased by 28% and 100% to $3.4bn and $753m respectively, reflecting especially strong growth in lower margin corporate super. Retail super flows rose by a solid but not spectacular 11% (in line with AXA) with some lingering impact of operational changes implemented during the period plus the deferral of contributions as customers consider the June 30 transitional arrangements in more detail. Following significant business profit growth and $1.5bn of capital returns, AMP's earnings quality has improved considerably over the past five years, with business profits accounting for 80% of FY06 underlying profit compared with only 61% in FY02. On this basis, the analyst reiterates their outperform recommendation. Although 1Q07 cashflows were solid but not spectacular, momentum is expected to accelerate in 2Q07 and beyond as the recent superannuation legislative amendments bite.

AMP has a Neutral 2 broker call and a steady $10.70 share price target from stockmarket analyst UBS. Q1 fund flows poor: AMP reported net fund flows of $753m for Q107 vs. $358m pcp, although $380m of the $395m increase is accounted for in a single corporate superannuation account win. Low margin on this new business vs. low incremental costs aside, the implications for broader retail net flows are poor, in our view. Value of new business also a question in the analyst's minds: Of particular note: (1) Reasonable Retail super net flows +10.5% on pcp at $232m (2) Corporate super net flows $530m vs. $105m pcp (3) Wealth protection net flows dn 7% to $39m (4) AMP Financial Planning net flows dn 4% at $265m (5) Hillross net flows dn 25% at $126m (but up 7% adj for transfer in pcp). Potential for further disappointment: AMP has had disappointing aspects of funds flow for 3 consecutive quarters in addition to entering then broadening the scope of a regulatory undertaking with ASIC. Their Neutral 2 rating is unchanged; they think AMP is unlikely to outperform on a 6-12 month view. Potential Positives for AMP: (1) Operating leverage (2) Reduced capital intensity (3) market position. Key potential risks: (1) mature run-offs an earnings drag (2) contemporary growth disappointing (3) valuation stretch.