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 held its 2008 AGM yesterday, and took the opportunity to highlight the tough conditions that have affected AMP over the first half of this year. This has been reflected in the share price performance year to date as can be seen below. It hasn’t all been doom and gloom however. The business has in fact demonstrated a great deal of earnings resilience to challenging markets. This was highlighted by the following facts;

• A material proportion of AMP’s cash flow is derived from the 9% compulsory super levy and are not impacted by market volatility.
• Around 45% of business earnings are not typically impacted by short-term market volatility. Eg. Life risk and the mature book.
• NPAT is much less reliant on investment earnings on capital – only 16% of FY07 NPAT, compared with ~ 50% in FY04

It’s not all doom and gloom however….. There are some definite rays of sunshine bursting over the horizon in the form of platforms for growth. AMP’s CEO outlined 5 platforms of particular importance;

1. Growing distribution numbers and capacity – to be achieved by increasing planner numbers and productivity.
2. Reshaping AMPCI into a high value add investment manager – This would be achieved through the development of specialised, higher margin products (eg. Property and infrastructure) and the increased penetration of external distribution platforms.
3. Expanding AMPCI into Asia – The key here is the development of distribution relationships in key markets primarily in North Asia. Evidence of success in this space is the fact that AMP is the only Australian fund manager licensed to manage Chinese equities on the Chinese mainland, and the first fund manager in the world to be granted a second quota (license).
4. Increased penetration of high net worth customers – It is anticipated this could occur through the groups owned but independent distribution channels, and potentially via the corporate super distribution channel.
5. Increased investment in brand, technology and people.

AMP remains MRE’s preferred low risk, large cap wealth management exposure.