AMP’s 1H18 result was underpinned by effective cost management offsetting weaker revenue performance.
The Australian Wealth Management division saw net outflows of $673m in the quarter.
Going forward, we expect well managed costs to offset weaker revenue. There is longer-term value here for patient investors, who are willing to hold the stock through to the appointment of a new permanent CEO.
In 2019, AMP’s board will likely outline a plan to split the funds management business away from the traditional advice side model, unlocking value for shareholders.
We have AMP now trading on a 6.8% yield and expect FY19 reported profit to remain around $800m.
The Big four banks will be in the spotlight this week as the Banking RoyalCommission commences round five today in Sydney.
The main topic for this round of examination will be the fees, charges and weak performance of bank-managed superannuation funds.
One Melbourne-based think tank has estimated that excessive fees and poor performance can cost superannuation investors up to $12 billion per year.
Australia’s largest superannuation provider, AMP, felt the wrath of the Royal commission during the last round of testimony, which saw their share price drop over 30% and the sacking of its chairman, CEO and three other directors.
The chart below illustrates the performance of AMP’s share price relative to the other Big 4 banks.
We don’t have ALGO buy signals for any of the domestic banks and we’re not holding any banking names in our ASX Top 100 portfolio. However, we will look for signals as the share prices approach the June lows.
AMP will need to address a wide range of issues including the Royal Commission responses, grandfathering and impact of Budget proposals in order for investors to understand AMP’s sustainable level of profitability.
Investors are also looking for the CEO to outline the longer-term group strategy. With many anticapiting some sort of restructure and the separation of the funds management business away from the advice model.
1H18E profit guidance came in lower than consensus expectations at $490-$500 million.
AMP is the worst performing stock in the ASX 50 model.
We have two under performing stocks, AMP and FMG. Both businesses face unique structural issues that have weighed on their respective share prices.
We feel investors will be rewarded for slowly accumulating AMP shares at discounted levels but it is very difficult to see when the inflection point occurs.
AMP goes ex div $0.145 on 23rd August and we have the stock trading on a forward yield of 7%.
One of Australia’s largest money managers, AMP, has caved in on the pressure from index and computerized trading and has dropped their fees, and is looking to sack most of their active equity managers.
The bulk of the $29 billion in funds the firm now manages will be rolled into lower-cost strategies including existing quantitative funds within AMP Capital.
Our ALGO engine triggered a buy signal for AMP at $4.80 on August 21st.
We see key chart resistance in the $5.25 area and would look to exit long positions at, or near, that level.
We continue to take a very cautious approach to the market, especially when we look at potential negative events over the next 8 weeks. Also, realizing that we approach this juncture at peak valuations for many global equity markets.
With the above in mind, Investors could be forgiven for wanting to sit on the sideline or only hold the highest of quality names. Traders on the other hand, will continue to remain active and apply stop-losses as a way of mitigating risk.
The Algo Engine has recently flagged buy signals in AMP and SUN. Both of these are reasonable prospects for a bounce from the oversold conditions, although stop losses should be established below the recent pivot point.
Our ALGO engine triggered a buy signal in AMP at $5.06 going into yesterday’s ASX close.
Since posting a tepid earnings report on August 10th, AMP shares have dropped from $5.45 down to yesterday’s low of $5.05.
The ALGO picked up on the “higher low” pattern since the initial support at $5.00 held and the recent low at $4.90 was not challenged.
Taking into account the earnings report showed revenue up 25% to $7.6 billion, and the interim dividend was lifted 4% to 14.5 cents, we see scope for some capital appreciation in the AMP from these levels.
Investors should look at placing a stop-loss order just under the June 9th low of $4.90.
Shares of AMP have been carving out a triple-top pattern since October of last year. Since then, the share price has topped out around the $5.30 level on January 9th, and again on April 4th.
Regular readers will recall that AMP posted a loss of $344 million back in February. This was the company’s first full year loss since 2003 and exposed ongoing concerns about their life insurance and wealth protection divisions.
We are currently holding a $5.00/4.60 put spread into June and suggest investors look at downside opportunities from AMP.
Our near-term target is $4.60, but see scope for a move back to the November low of $4.30.
A number of stocks within the ASX top 50 appear to be setting up medium term short signals.
We’re mindful of the upward bias in equity indexes, however, much of this is driven by broad inflows into index funds and valuations are becoming stretched, even if Q1 earnings in the US hit their target.
Here is a list of the names that are worth taking a closer look at….