AMP (ASX:AMP) flags capital return from sale of Collimate

Company News

by Melissa Darmawan

AMP (ASX:AMP) soared 13.2 per cent to $1.14 after flagging a capital return from its sale of Collimate Capital's international infrastructure equity business to US-based digital infrastructure firm DigitalBridge for up to $699 million or 8 per cent of assets under management.

This means that AMP will no longer demerge its private markets arm with its separation costs set to be immaterial. Analysts have said that its dividend yield could top 20 per cent in the company’s fiscal 2022 to 2023 years if it pays out the majority of net proceeds from its recent transactions which could hit $2 billion.

AMP is set to receive $462 million in upfront cash from the sale of those assets, an additional estimated $57 million performance fees payment, and up to $180 million, subject to future fund raising.

The announcement came after yesterday’s news that the wealth giant unveiled it was selling AMP Capital's real estate and domestic infrastructure equity business to Dexus for $250 million upfront and a possible earn-out of a maximum $300 million.

UBS considers the price disappointing but cites that ending a costly and distracting demerger is a positive. Morgan Stanley also noted that the deal comes at a cost, as the total consideration of up to $550 million for around $80 million of net profit represents up to 7 times price-to-earnings ratio. This is significantly below 15 to 30 times price-to-earnings ratio seen from global private market asset managers.

Meanwhile, Barrenjoey eyed the sale as unlocking further value for AMP. Analysts expect the share price to rally and believes that there's a potential for ongoing valuation growth as the sale process and core business strategy becomes clearer over the next 12 months. Adjusting for the asset sales, the broker estimates that AMP is trading at a 45 to 50 per cent price-to-earnings ratio discount to the market. Given the clarity on the demerger, the update supports attractive value at these levels, upgrading its rating to overweight from neutral with a $1.32 price target.

AMP's latest move is slated to de-risk its real estate and infrastructure equity business allowing the wealth giant to focus on operations locally with upside to its valuation.

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