Excerpt from switzer.com report on pricing AMP by splitting it up, QUOTE: " That’s of course a 12-month share price target and is based on earnings from continuing operations. However, another scenario is that AMP is broken-up and key business units are sold.
These would include AMP Bank, with its 110,000 customers and $20bn in assets. In FY18, AMP Bank made a net profit after tax of $148m. Valuing this on a multiple of say 10 times earnings, this gives it a valuation of around $1.5bn or approx. $0.50 per share.
Then there is the investment management business, AMP Capital. As at 31 December 2018, it managed assets of $187bn and contributed $167m in after tax profit. Although it is being impacted by investor outflows due to “AMP brand damage”, the AMP Capital team is widely respected. This business could be worth another $0.50 to $1.00 per share.
The sale of the legacy life business to Resolute was originally priced at $3.3bn. Only $1.9bn of this was in cash, with Resolute making a $300m capital contribution and providing a further $1.1bn in non-cash consideration (mainly an upside for AMP of future earnings). Taking away the $700m diminution in value and other factors, the life business is possibly worth around $2bn – about $0.70 per share.
AMP has a NZ wealth management and advice business (which boast operating earnings of A$40m) that is slated to be sold via an IPO, and of course, the Australian wealth management and advice business with its thousands of financial planners, affiliated licensees and hundreds of thousands of clients. Who knows what this is worth, or what parts are even saleable?
Putting these together, a “break-up” of the parts valuation is north of $2.
Importantly, AMP hasn’t made any decision to go down this path (apart from the sale of the life business). But it is not hard to foresee a scenario where through growing market pressure, the Board is forced to confront this option. If the share price stays under $2, the calls will get louder."
Excerpt from switzer.com report on pricing AMP by splitting it...
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