when will AMP HIT $2.00, page-849

Market valuation

“They’re not going to get a better price in a trade sale, so why not let the market decide what the asset manager is worth by doing an IPO?”

At the very least, he noted, AMP Capital was likely to be worth $3.07 billion, given that AMP paid $460 million last August to repurchase Mitsubishi UFJ Trust and Banking Corporation’s 15 per cent stake in the asset manager.

The market valuation of asset managers such as AMP Capital varies widely, depending on whether their assets under management are growing rapidly, the loyalty shown by investors, and the level of fees that they are able to charge for their services.

He noted that the fact that AMP Capital’s assets under management had fallen to $190 billion in the 2020 financial year, from $203 billion the previous year, would have eroded some of its value.

“AMP Capital was probably worth $5 billion a year ago. Now it would probably float for $3 billion.”
Still, he noted that a partial float, and a rebranding of AMP Capital would help to insulate the asset manager from some of the damage it had sustained as a result of being associated with the AMP brand.

Surplus capital

“It needs to be spun out, so that it can continue to grow and attract investors, particularly for its infrastructure and real estate funds.”

In addition, he said, doing an IPO would help to lock in AMP Capital’s existing talent, and make it easier to attract new employees.

“People want to join a separately listed, separately branded company.”

Major shareholders are also frustrated that AMP is not in a position to return surplus capital to shareholders, because discussions with Ares are ongoing.

In its latest results presentation, AMP said it was sitting on $521 million in surplus capital. But some shareholders believe that this is a very conservative estimate, and that AMP’s actual surplus capital is close to $1 billion.

What’s more, they point out that in the present ultra-low interest rate environment, this surplus capital is earning a return that is close to zero.

They would prefer AMP to use this surplus capital to undertake a massive share buyback, which could reduce the number of AMP shares on issue by as much as 20 per cent.