Daily ShareChat: AMP

By Jenny Ruth

Sunday 19th September 2010

Fund manager and insurance company AMP's first result was disappointing and the market didn't like management's outlook, says David Walker at Aegis Equities Research.

The underlying net profit of $A375 million ($NZ484.6 million) was about 5% short of consensus forecasts while the outlook "referred to subdued retail investor sentiment, potential regulatory change, ongoing market volatility and a downbeat global economic outlook."

As a result, Walker has downgraded his calendar 2010 forecast net profit 8% from $A870 million to $A800 million.

Management comments reiterating its commitment to discipline in takeovers "we took as virtual admission an acquisition of AXA Asia Pacific would be too dilutive with the AMP share price at current levels," even if the Australian Competition and Consumer Commission blocks the National Australia Bank proposal.

"With the advantages of acquiring AXA now seemingly beyond reach, it is not clear where AMP will turn, given the lack of similar scale acquisitions," Walker says.

"Unless the share price recovers enough to justify a renewed offer for AXA, AMP will continue as a well-managed equity market play facing a mixed outlook on revenue growth and margins," he says.

Walker has raised his valuation of the stock by 2% to $A6.20, removing his previous 10% discount for a large equity raising to fund a renewed pitch for AXA.

Recommendation: Accumulate.

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