For this to happen, AMP would have to cancel any capital return. From reading this site you can see how much people value a return of capital. Me not so much.
AMP also has a long history of losing value from acquisitions. GIO, AXA, all the UK companies such as Pearl, and anything else it bought in the UK or USA, analysts would not be too happy with an acquisition unless it was a great fit and compelling. The synergies would have to be huge and the risks low. I can see synergies in acquisitions but not low risk.
Having said that, acquisition of the right asset would be the only way I see to grow profit in a significant way in a 3 year period. Giving back the money to shareholders is an admission that management cannot make better use of 3/4 of a billion dollars. Me? I would like AMP to use this to borrow the same amount at the cheapest rates in history in order to generate a 10% return adding $150 million to ebit or about $75m to after tax profit. If they can lift return to13%, it will add $105m.
Today, the AFR has asked about where the AMP strategy is and suggested it will be a cost cutting and focus on roboadvice/technology strategy. This is not new for AMP. It will not grow profit. But let’s wait and see the strategy.
AMP Price at posting:
$2.17 Sentiment: None Disclosure: Held
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