AMP shareholders hope for change in fortune

Friday 13th February 2004

For one million embattled AMP shareholders the projected benefits of the company's demerger from its UK operations cannot come soon enough.

This is especially so after NAB's decision to sell its "strategic" stake, which has removed any takeover premium from the share price.

The stock is now trading at analysts' fundamental valuations as investors await some sign of improvement.

There is, however, potential upside emerging from several key areas not necessarily related to the demerger, according to analysts.

These include new business volumes, which appear to be coming off cyclical lows following a pick-up in the second half of 2003, management's desire to cut costs by up to 20% and generally healthier equity markets.

As one analyst noted, a 20% reduction in controllable unit costs would amount to a valuation upside of 61Ac a share.

AMP's earnings profile and valuation are sensitive to equity market movements because its fee structure is strongly correlated to funds under management.

Since June last year the ASX all ordinaries has increased by about 10% and the MSCI World Index has increased by 17.5%.

Pro forma financial results for the "new AMP" for the year ended December 2003 were estimated in a range, based on investment return assumptions, from a $A362 million low to a high of $A511 million.

The result, based on current market levels, was likely to be at the top end of the forecast.

AMP chief executive Andrew Mohl said the demerger would bring the company back to its roots and allow it to focus totally on its 2.3 million customers in Australasia.

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