Own AMP shares? Here’s why the company could be looking to raise capital

Analysts are wary of what AMP’s balance sheet might look like post-demerger…
The post Own AMP shares? Here’s why the company could be looking to raise capital appeared first on The Motley Fool Australia. –

Shares in AMP Ltd (ASX: AMP) have continued to struggle in recent weeks. Despite a 6% rally in October, the financial services company has weakened throughout November and early December. As a result, the AMP share price is within shooting distance of its 52-week low of 88.5 cents.

At the time of writing, shares in the multibillion-dollar wealth management business are down 1.9% to 93 cents. For comparison, the S&P/ASX 200 Index (ASX: XJO) has lifted this afternoon and is currently trading 0.13% higher.

So, what is weighing on the mind of AMP investors lately?

Time to pass around the collection plate

It appears investors of AMP shares have been shaken since 22 November 2021, when the company revealed it would continue as manager of the AMP Capital Wholesale Office Fund (AWOF).

In the same announcement, shareholders were told AMP Limited expected to contribute up to $500 million of capital support for the real estate business ahead of the company’s demerger. Given the company’s falling cash balance, this news wasn’t the best for anyone concerned with AMP’s balance sheet.

Unfortunately, only a few days later, the financial institution revealed a $325 million impairment charge. Detailing the charge, AMP said the charges were mostly non-cash and were a product of its comprehensive balance sheet review.

The impairment charges comprise partial impairment of deferred tax assets and a write-down of intangibles, among other things. Furthermore, the charges are expected to come to a total capital impact of $220 million for FY2021.

Following the update from AMP, analysts at Citi rated AMP shares a “neutral” and retained its price target of $1.25 per share. Importantly, the broker put a question mark over whether the financial services company would have sufficient capital for its infrastructure funds post-merger.

While the company detailed the breakdown of earnings for its emerged AMP Limited and PrivateMarketsCo at its recent investor day, separation of the company’s cash is hazy. Additionally, up to $295 million (post-tax) of demerger and transformation costs are expected in the coming years.

For this reason, Citi analysts are wary of the need for AMP to raise capital.

How have AMP shares performed?

The extensive scale of AMP on the ASX hasn’t prevented it from experiencing a substantial downfall over the years. In the past year, AMP shares have tumbled 46.6% in value. The financial services company maintains a market capitalisation of $3.02 billion in spite of the capital erosion.

A big shakeup for the company is likely to occur in the first half of 2022 if its demerger proceeds. However, the AMP Limited that emerges is hoped to be a simplified Australia and New Zealand retail wealth manager.

The post Own AMP shares? Here’s why the company could be looking to raise capital appeared first on The Motley Fool Australia.

Should you invest $1,000 in AMP right now?

Before you consider AMP, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and AMP wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

Top brokers name 3 ASX shares to sell next week

Are AMP (ASX:AMP) shares priced as though ‘the situation is worse than it is’?

Top brokers name 3 ASX shares to sell today

These 3 ASX 200 shares are topping the volume charts on Thursday

ASX shares to buy for the Omicron COVID outbreak

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!