AMP 0.54% $1.86 amp limited

macca's take....amp prk qan

  1. Yak
    13,672 Posts.
    Qantas Airways

    Recommendation change

    We have reduced our short term recommendation on Qantas to Hold following the release of
    Virgin Blue’s March financial year end result.
    The outlook for the domestic market is starting to become clouded. The comments by Virgin
    suggest it has increased its capacity in the domestic market by 24%. We expect Qantas will
    seek to maintain its market position and is likely to match Virgin’s increase in capacity. The
    outcome will see the Australian market expand by 10-11% in the 2004 financial year,
    significantly higher than growth in demand over the last eight years of 4.0-4.5%.
    As a result, the risk of falls in the percentage of seats filled and the price received for each
    seat is heightened in the coming 12 months. One offset is the removal of the Ansett Levy of
    $10 per one-way ticket. Both participants will benefit from the stimulatory effects.
    The domestic market clearly will be a point of pressure for Qantas beyond August as Virgin
    Blue’s additional fleet starts to arrive. Moreover, unless we start to see a rebound in
    international market volumes or approval of the AirNZ / Qantas joint operating agreement, we
    expect Qantas will perform in line with the market in the near term.
    We believe the appropriate price to buy the stock is its net asset value of $2.87 per share. At
    this price it more truly values Qantas’ strong fundamentals, namely domestic duopoly and that
    most of its international routes have solid market positions and loyalty revenue.

    ASX Code:
    QAN
    Share Price:
    $3.21
    Short term:
    Hold
    Long term:
    Hold
    Volatility index:
    High

    Patrick Corporation

    Virgin Blue, owned 50% by Patrick Corporation, released details of its 2003 full year result
    (March year end). Its profit of $110m was up 212% on the previous years and was in line with
    expectations.
    As also expected, disclosure was extremely modest with only a few lines of the profit and loss
    statement and no cash flow statement or balance sheet. However, there are a few interesting
    items. Firstly, revenue of $924m was $60m above expectations. Secondly, operating lease
    costs appear around 20% below estimates. This suggests Virgin has cut a great deal with
    Boeing. Importantly, this benefit is locked in through long term leases. On the negative side,
    we have probably underestimated the cost of staff - numbers now sit at 2,400.
    The outlook is less positive. Refer to the above Qantas article.
    Meanwhile, Richard Branson also detailed his vision for the Virgin float in November. This
    would see new equity of 20% issued with Patrick and Branson each selling down a further 5%.
    On our numbers this would dilute Patrick down to around 36%, and it is being strongly resisted
    by a challenge to the joint venture agreement. The dispute should be resolved in coming
    months and we remain of the view that Patrick would prefer control.
    Patrick’s share price has fallen 9.8% since announcing its result. The simple price to earnings
    multiple for Patrick is 18 times 2003 earnings, but stripping out Virgin Blue the price to
    earnings ratio is 20 times. With other business areas within Patrick underperforming and the
    prospect of a weaker second half performance driven by lower container volumes, this multiple
    still looks high. We retain out Hold recommendation.

    PRK
    Share Price:
    $12.53
    Short term:
    Hold
    Long term:
    Buy
    Volatility index:
    Medium

    AMP

    Commentary at the AGM provided little in the way of new financial information although the
    CEO did note that difficult trading conditions persist and will continue to adversely impact
    profitability.
    On the topic of corporate activity, Chairman Peter Wilcox indicated that while AMP had not
    received any “firm” proposals, it had been approached informally by undisclosed entities.
    Impact
    It is inevitable that AMP’s pre-eminent (but possibly faltering?) positioning in the Australian
    financial services market will pique interest from potential suitors, particularly given the
    proposed split from the poorly positioned and unattractive UK operation.
    However, with much of the demerger detail yet to be finalised and the demerger timetable
    extending to December, definitive proposals from potential corporate partners / acquirers
    appear unlikely in the near term ie. speculation on this subject is expected to heighten in the
    lead up to and following completion of the demerger.
    The earnings downgrade arising from the weak first quarter result, business reorganisation
    and the dilutionary impact of the recent capital raising, should largely be already reflected in
    AMP's share price (but given the delay between any eventual recovery in markets /economy
    and wealth management earnings there is some risk that the timing of any earnings rebound
    will disappoint).
    Action
    In view of the economic environment, unresolved corporate/execution risks (perceived and/or
    real), the likely continuation of negative newsflow (in the near term at least) and the prospect
    of a substantially undersubscribed retail share purchase plan, catalysts for a near term
    recovery in AMP’s share price are difficult to identify.

    ASX Code:
    AMP
    Share Price:
    $5.05
    Short term:
    Underperform
    Long term:
    Hold
    Volatility index:
    Medium
    ASX Code:
 
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$1.86
Change
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Mkt cap ! $6.392B
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Buyers (Bids)

No. Vol. Price($)
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Sellers (Offers)

Price($) Vol. No.
$1.87 100019 4
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