AMP Capital has retained the management rights to the AMP Wholesale Office Fund. AMP will outline its new strategy at an Investor Day on 30 November.
There was scant detail in the market release other than to say that, against some competition, AMP Capital had successfully retained the AWOF management rights to the $7 billion property fund. An undisclosed fee cut and the move to invest $500 million into the Real Estate Funds formed part of the revised deal. This puts some skin into the game for AMP investing alongside other unitholders.
This is similar to what AMP does on the infrastructure side of its business and will now attract regular distributions and capital gains over time.
AMP’s recent struggles multiplied through the Hayne Royal Commission to a point where many shareholders had abandoned the once iconic company. But we think it is now through the worst of the impact with asset sales and the separation of Life and Mature businesses simplifying the group. The demerger is set to unlock value in a quality asset with a strong market position.
All segments of AMP now have something positive to tell the market – AMP Bank has accelerating net mortgage book growth, Australian Wealth Management has improving net flows with material cost-out opportunity and AMP Capital just cleared its biggest headwind. AMP also has material equity stakes in China Life Pension Company, CLAMP, PCCP and there is approximately $100 million of net cost-out remaining in the group.
Investment view
The retention of the AWOF management rights is a big win and removes an overhang that has been unresolved for over a year and could have disrupted the demerger process.
AMP is one of Australia’s oldest institutions but had become a relic in a financial world that had long since bypassed its Menzies era grandeur. In fact, it was exactly 59 years ago today (23 Nov 1962) that Prime Minister Robert Menzies opened the AMP headquarters on Circular Quay in Sydney. How fitting then, that a brand new tower has arisen alongside it to signify the resurrection of AMP as a still relevant player in the superannuation and wealth industry today.
From the Investor Day, we are expecting greater clarity on the demerger details, possible capital structure and increased disclosure on what is being spun out. AMP could also update its earnings guidance. AMP has also flagged it will clarify what will happen to the proceeds from the Resolution Life equity stake.
There is clearly plenty of execution risk in the business as the demerger approaches and the restructured group gets on with its core business rather than fighting fires.
The stock has sustained so many blows in recent years that investors have understandably lost confidence. But we think this period of contrition is now over and there is a good opportunity to own AMP at a point when expectations are very low, but opportunity is temptingly high.
