Is the AMP (ASX:AMP) share price really worth $2.45?

Is the AMP Limited (ASX: AMP) share price really worth $2.45 a share? One investment bank thinks so, but there’s a big catch.

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The AMP Limited (ASX: AMP) share price has had a dismal 2020. In fact, it really has had a dismal performance its whole listed life, if this share price graph is anything to go by:

AMP share price
AMP Limited 10-year Share Price Data | Source: fool.com.au

AMP shares closed at $1.70 yesterday. That’s not too bad considering the company’s 52-week low is $1.08. But it’s not great if you consider that, in the 23 years AMP has been a public company (it demutualised in 1997), its all-time low is also $1.08, whereas its all-time high is approximately $10.84, which it hit way back in 2007.

AMP’s reputation as one of Australia’s oldest and most trusted wealth managers took a potentially fatal hit during the 2018 Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The subsequent appointment of a new CEO in Francesco de Ferrari was supposed to herald a turnaround for the company. However, AMP seemed to raise the white flag earlier this year when it declared all parts of its business open for a possible sale. The company is already sitting on a potential takeover offer of $1.85 per share from the United States-listed Ares Management Corp (NYSE: ARES). AMP’s flagship life insurance business has already been offloaded. We also got the news last month that AMP is closing its range of exchange-traded fund (ETF) offerings. And that was on top of revelations of a sexual harassment scandal at the company.

AMP’s true worth?

So what are AMP shares worth today? The market tells us around $1.70 per share, which values AMP at a market capitalisation of $5.83 billion. But new reporting from the Australian Financial Review (AFR) has a different take.

The AFR reports that number crunchers at Swiss investment bank UBS Group AG (NYSE: UBS) have calculated that AMP shares could be worth as much as $2.45 (with a market cap of $8.4 billion). Before AMP shareholders get too excited though, there’s a catch.

That price comes from valuing a broken up AMP. That is, if AMP is dismembered into its various parts and sold off, AMP shareholders could receive as much as $2.45 per share in cash. But the range UBS gave was actually $1.45-$2.45.

That upper range comes from an estimation that AMP’s most profitable division – AMP Capital – could be worth as much as $1.31 per share. It gives the AMP Bank division a potential valuation of 37 cents a share, and its New Zealand wealth management arm 12 cents. The Australian wealth management division receives an estimated value of 74 cents a share.

With this estimation, AMP shareholders might happily accept a breakup, even if it means the dismal end of a 171-year-old institution.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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