The AMP Ltd (ASX: AMP) share price rallied more than 21% last month as investors upped expectations that the company has finally turned a corner.
The embattled wealth manager is selling assets to shore up its balance sheet and to streamline its business.
There is also optimism that the reinvented AMP will benefit from a reported severe shortage of financial advisors.
AMP shares trading outlook improving
According to media and industry reports, there is an advisor exodus due to higher regulatory requirements that some believe are too strict. The lack of advisors has sent the cost of financial advice sharply higher.
Meanwhile, the demand for expert advice is strong, given volatile markets and imminent possible interest rate hikes. If AMP can capitalise on the growing market opportunity, its trading outlook won’t look as dire as it did in January this year. That is when the AMP share price slumped to an all-time low of $0.87.
AMP share price boosted by capital return hopes
While any transformation takes time and money, at least AMP won’t have to worry too much about the latter.
The agreements it announced in the last few months could see its coffers swell by up to $2 billion.
AMP entered into a sale agreement of its Collimate Capital’s international infrastructure equity business to DigitalBridge Investment Holdco on 28 April. AMP will be paid an upfront amount of $462 million and a total value of up to $699 million.
Up to $2 billion cash splash
This is on top of the $430 million sale of Collimate’s domestic infrastructure equity and real estate business announced the day before.
Throw in the $578 million it will get from the sale of the infrastructure debt platform completed in February 2022, and the total AMP will receive surges to around $1.5 billion. AMP stands to reap up to circa $2 billion in cash if earnouts are included.
AMP estimates that it will cost around $20 million post tax to separate the assets from the main group for the sale.
How AMP shareholders might be rewarded
There is another reason why the AMP share price is responding positively to the divestments. Management will use part of the proceeds to repay debt and return most of the cash to shareholders.
AMP is likely to undertake an on-market share buy-back, which will support the AMP share price. It will also look at a capital return program. This could take the form of a special dividend, like it did in September 2020, or an off-market share buyback.
The post The AMP share price soared 21% in April. Here’s why 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 over 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 January 13th 2022
- These were the best performing ASX 200 shares in April
- These were the best performing ASX 200 shares last week
- 3 ASX All Ordinaries shares that soared more than 9% today
- Here are the top 10 ASX shares today
- Here are the 3 most heavily traded ASX 200 shares on Thursday
Motley Fool contributor Brendon Lau has positions in AMP Limited. 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 Scott Phillips.
from The Motley Fool Australia https://ift.tt/GxT8kQJ