AMP: New Zealand’s Dying Phoenix?

For too long, Kiwi investors have wallowed in New Zealand’s arid IPO landscape…

The multi-year drought has only been interrupted by a couple of light sprinklings: Oceania Healthcare and TIL Logistics in 2017…and only the compliance listing of QEX Logistics this year.

The dry spell has rendered eager investors parched and thirsty…

As if we’ve been locked in a prison cell, financial folks have resorted to entertaining ourselves with mindless banter about Simon Bridges’ latest stuff-up or Prince Harry’s visit to Fiji.

And while financial commentators spiral into insanity, investors have paced on the sidelines…wondering when they’ll be able to return to the action.

Time keeps going on, after all…and retirement just keeps getting closer.

But, finally, after literally years of waiting, there appears to be dark rain clouds on the horizon…

We wipe the sweat from our brows and squint into the distance…

Is that…an IPO?

Yes, indeed. An initial public offering is on the forecast…but it comes on the back of another NZX-lister’s exodus.

 

2019’s biggest IPO (so far)

Back in the mid-1800s, a group of concerned community leaders in New Zealand found that workers of the time fought injury and disease to provide for their families. It was a threatening environment, utterly lacking in security or stability. As such, the prospect of losing a central breadwinner could be catastrophic.

The community leaders recognised this vulnerability and sought a new way to offer workers assurance that their families would be provided for in case something happened.

Thus, in 1854, the Australian Mutual Provident Society was born…serving both Kiwi and Aussie miners and farmers with life insurance policies.

This was when New Zealand’s entire population was fewer than 100,000…and Parliament was sitting for the first time.

Since then, Australian Mutual Provident (AMP) has been deeply ingrained in New Zealand’s modern history…

But that era is coming to a close… [openx slug=inpost]

Yes, indeed — AMP is exiting the New Zealand marketplace. As a consequence of their recent slap on the wrist from the Reserve Bank of Australia, the management decided to sell off their life-insurance arm, AMP Life, and to cut off the remaining business, AMP New Zealand, as its own entity…to be listed on the NZX next year.

Confusingly-titled AMP Capital Investors, a separate and independent firm, will continue to operate business as usual.

Not sure what to make of it all?

Well, AMP departing New Zealand is surely a sorry sign of the times, but it’s not necessarily the NZ market that’s driving that decision. Rather it’s the mess that is the Aussie side.

Whenever fat cat organisations like AMP get caught with their hand in the cookie jar, they quickly call on the same strategy to reassure their customers — ‘We won’t do it again. Look, we’re doing some restructuring here…some new chief officers there. Tada! A new-and-improved us!’

It’s par for the course in these situations…and it’s unfortunate that it means the departure of one of NZ’s oldest companies…

But AMP’s withdrawal won’t mean much practically. The local assets and staff will likely all stay. Customers and their funds won’t see an interruption in their service. It’s just going to be a new logo on the business card, that’s all.

But on the investing side, it means that the old AMP wealth-management squad will list on the NZX under a new name. And that, if anything, is exciting.

Right?

Well, AMP’s shares on the NZX, listed as AMP Limited [NZX:AMP.NZ], haven’t fared too well this year.

Yahoo Finance

Source: Yahoo Finance

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In fact, it’s been decimated. Even if you cut out the recent drop from $3.50 to $2.85 over the past week, investors would still be sitting on a loss of over 38% year-to-date.

To clarify, this stock refers to AMP New Zealand, which include both AMP Life and AMP’s wealth management arm.

From a non-technical perspective, this doesn’t look great for the new company.

If you’ve got a mouldy strawberry, you shouldn’t cut off the mould and eat it. The whole thing is compromised.

Maybe that’s what’s going on here with AMP’s stock. The financial statements could help clue us in.

From AMP NZ’s first half 2018 report (emphasis mine):

AMP Financial Services New Zealand (AMP New Zealand) has reported operating earnings of $60.4 million for the half year to June 2018.

While operating earnings were down 12.6 per cent, this was mainly driven by a reduction in experience profits reflecting an increase in the number of claims AMP New Zealand paid to support its customers who were unable to work due to an illness or injury.

Assets under management (AUM) increased 7.2 per cent to $17.5 billion as a result of positive market performance and net cashflows. AMP KiwiSaver Scheme AUM also increased 12.3 per cent to reach $5.2 billion.

In other words, insurance payouts have been tying the company down, but at least the wealth management and KiwiSaver guys managed to lock in 7% and 12% increases respectively.

So, if you were to separate the insurance arm and the wealth management/KiwiSaver arm, the latter might be worth investing in. And that’s who’s going to IPO next year.

Maybe we will get a thirst-quenching opportunity after all…

Best,
Taylor Kee
Editor, Money Morning New Zealand


Taylor Kee is the lead Editor at Money Morning NZ. With a background in the financial publishing industry, Taylor knows how simple, yet difficult investing can be. He has worked with a range of assets classes, and with some of the world’s most thought-provoking financial writers, including Bill Bonner, Dan Denning, Doug Casey, and more. But he’s found his niche in macroeconomics and the excitement of technology investments. And Taylor is looking forward to the opportunity to share his thoughts on where New Zealand’s economy is going next and the opportunities it presents. Taylor shares these ideas with Money Morning NZ readers each day.


One response to “AMP: New Zealand’s Dying Phoenix?

  1. The AMP stock listed on NZX is part of a dual listing for AMP group, not AMP NZ. AMP NZ is a wholly owned subsidiary of AMP group.

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