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.
