Investing in AMP is ‘not a crazy bet’: Allan Gray

24 May 2022
| By Liam Cormican |
image
image
expand image

Having AMP shares is “not a crazy bet”, according to contrarian investors Allan Gray, as the business has no debt and will soon have billions of dollars in surplus capital from its break-up and sale strategy.

Speaking at Allan Gray’s Sydney Investment Forum, chief investment officer, Simon Mawhinney, said AMP’s strategy of breaking up and selling segments of its business had finished with the sale of AMP Capital (Collimate Capital) and its life insurance business.

“The horse has bolted on the break-up and sale strategy… [it’s] pretty much done,” he said.

“And it hasn’t been value destroying, maybe somewhat enhancing.

“It doesn’t seem like a crazy bet to make. AMP is 3% of our portfolio at the moment, we haven’t bought or sold for over a year.”

While referring to AMP’s wealth management business as a “donut” and “a bit like the buy now, pay later companies that are worth zero”, Mawhinney said AMP Bank had fundamental value in the form of $1.5 billion in net tangible assets.

“I made a reference to NAB which traded at around 1.8 times net tangible assets (NTA), regional banks are around 1.3 times NTA, but let’s just say AMP Bank, because all things AMP are worth a discount, let’s just say AMP bank is 1 times NTA and that’s $1.5 billion,” he said.

He said the New Zealand business made around $20 million a year in earnings and was worth about $500 million, calculating the cumulative value of the Australian and New Zealand bank to be about $2 billion.

And with AMP selling its life insurance business for $3 billion and AMP Capital for $2 billion (Mawhinney said it should have been $3.5 billion if Boe Pahari had not been appointed to chief executive), AMP was sitting on billions in surplus capital to be delivered to shareholders.

“They have this war chest of money which is around about $2.7 billion and so when you add that onto… the $2 billion from AMP Bank and New Zealand, you easily get to $1 billion of upside of AMP share from here and that is with this donut in wealth management,” he said.

“But something for nothing always looks good for us and of course something for $1 billon looks even better, in other words, we take wealth management and get paid $1 billion to receive it.”

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

GG

So shareholders lose a dividend plus have seen the erosion of value. Qantas decides to clawback remuneration from Alan ...

2 months 1 week ago
Denise Baker

This is why I left my last position. There was no interest in giving the client quality time, it was all about bumping ...

2 months 1 week ago
gonski

So the Hayne Royal Commission has left us with this. What a sad day for the financial planning industry. Clearly most ...

2 months 1 week ago

A Sydney-based financial adviser has been banned from providing financial services in the interest of consumer protection after failing to act on conduct concerns. ...

3 weeks 3 days ago

ASIC has cancelled the AFSL of a $250 million Sydney fund manager, one of two AFSL cancellations announced by the corporate regulator....

3 weeks 1 day ago

Having divested its advice business in August, AMP is undergoing restructuring in at least four other departments amid a cost simplification program....

2 weeks 5 days ago