The AMP Limited (ASX: AMP) share price is up 8.92% to $1.92 a share at the time of writing today. The broader S&P/ASX 200 Index (INDEXASX: JXO) is having a bit of a roller-coaster kind of day, up 1%, then down 1% and now flat. But in contrast, AMP shares are surging and are back to the levels we were seeing before the March stock market crash. In fact, since 24 March, AMP shares are up nearly 80%.
So why are AMP shares surging today? And more importantly, are AMP shares still a buy at these levels?
Why the AMP share price is raising the roof
We can safely say that the AMP share price surge we are seeing today is the direct result of the company receiving the green light for its AMP Life sale. This morning the company announced that it has been given the all-clear by the Reserve Bank of New Zealand (RBNZ) for the sale of its life insurance business to go ahead. The RBNZ blocked AMP’s initial proposal last year on the grounds that the deal endangered the wellbeing of AMP’s New Zealand clients.
If the sale does indeed go ahead, it will result in approximately $1 billion in proceeds for AMP. The sale was the central tenet of AMP’s new-ish CEO Francesco De Ferrari’s turnaround plan for the emballed wealth manager.
The AMP share price is still recovering from the revelations that came to light during the 2018 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Before this time, AMP was worth around $5 a share. But revelations of systemic fraud, mischarging of customers and charging fees for no service saw an exodus of customers and AMP’s share price smashed.
That’s why the cash injection that the now-cleared sale will provide the company is welcome for shareholders today.
Is AMP still a buy today?
I say ‘still a buy’ only because picking up AMP shares at any time over the past 3 months would likely have netted a tidy profit on today’s AMP share price. But how are things looking from here?
Well, there’s no doubt that AMP will be a stronger company once it amputates the struggling AMP Life business. There is now little prospects of a dilutive capital raising and the company can continue to focus on the avenues where it has the most strength – namely asset management.
AMP shares are still cheap today from a valuation perspective, in my view. But then again, there is still a lot of uncertainty in this company’s future. So much so that I’m not tempted at all. I like to invest in companies with clear competitive advantages and strong brands. AMP has neither of these things in my opinion and so I’ll be looking elsewhere for a future winner.