AXA Asia Pacific (AXA) is a diversified financial services company that has been operating in Australia for over 100 years. The company’s main products are spread across investments, insurance, retirement and superannuation.

AXA was one of the hot stocks late last year after agreeing to AMP’s takeover offer for the group.

On 15 February AXA announced a 1H11 net profit of $602 million, down 11% from a year earlier.

Investment earnings were unchanged at $185.1 million, with the positive impact of falling US bond yields offsetting negative equity market returns.

In Australia, earnings were up 8% to $190 million, mainly due to higher fee revenue.  However, earnings at Hong Kong were down 11% to $297 million.

AXA declared an interim dividend of 9.25 cents (unfranked), which was unchanged from a year ago, whilst its share price fell 0.2%.

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AMP Limited (AMP) is a leading wealth management company with more than 3.4 million customers across Australia and New Zealand.

It is Australia’s largest retail and corporate superannuation provider, one of the region’s most significant investment managers, and is widely considered among the blue chip stocks.

After bouncing back in 2009 after a disastrous 2008, AMP encountered further challenges in 2010 on fears of a global economic slowdown.

However, the company is now looking at a stronger future on the likelihood of its latest bid for AXA Asia Pacific Holdings going ahead and on a recovering global and local economy.

Overcoming obstacles

In August, AMP released its 1H10 results. Net profit for the half rose 17.4% to $425 million on growth initiatives, and ahead of analysts’ forecasts for around $383.4 million.

Of concern was AMP’s underlying profit result of $383 million. Though this was up from $367 million in the same half a year ago, it was below market expectations for around $420 million.

AMP declared a half dividend of 15 cents per share, which was up on a dividend of 14 cents a year ago.

One major upside was cost guidance. AMP expects costs in the Australian Financial Services division to rise just 3% in 2010, down from a prior forecast for 4%-5% higher costs.

Holding onto bid hopes

AMP’s stock has regained ground over its proposed $13.3 billion takeover of AXA Asia Pacific Holdings, announced yesterday.

Under the terms of the proposal, AXA shareholders will receive 0.73 AMP shares for every AXA share owned, $2.55 in cash, as a well as a final dividend of 9.25 cents per AXA share.

Importantly, AMP said that it will remain soundly capitalised following the merger, and would maintain its policy of paying out 75% – 85% of its underlying profit in dividends.

The deal is also expected to be EPS accretive from FY12 and will assume annual net synergy benefits of $120 million.

As a result, the combined AXA/AMP entity will be one of the stocks to watch in coming years.

Conclusion

Market interest in AMP has returned in spades owing to the group’s latest bid for AXA Asia Pacific Holdings, which looks likely to go ahead.

Investors are optimistic over the deal, and if it goes through as planned it is likely AMP will see significant upside.

Though AMP recently reported mixed 1H10 results, recovering global markets and strength for the Australian finance sector should also put the group in good stead going forward.

Following AMP’s renewed AXA bid, we would like to upgrade our rating on AMP to a Hold (from Sell) in anticipation of upside from the deal.

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National Australia Bank (NAB) is one of Australia’s big four banks, with divisions spanning retail and business banking, wealth management, capital markets and institutional banking.

NAB’s businesses span across the globe, with operations in the US (Great Western Bank), the UK (Clydesdale and Yorkshire Bank), and New Zealand (BNZ).

Given NAB’s stature, it is also widely considered one of the blue chip stocks in the Australian share market.

NAB surprised the market in late 2009 by making a play for AXA Asia Pacific for a consideration of $4.6 billion, or $6.43 per share.

Recently, however, NAB terminated its bid for the wealth manager.

The announcement followed last week’s decision by the ACCC to block NAB’s bid on competition grounds.

The move now opens the door for AMP Ltd (AMP) to make another play for AXA.

The market gave its tick of approval to the decision, with NAB shares jumping 2.9% following its announcement.

Aussie Stocks – AMP Limited  (AMP)

AMP Limited (AMP) is a leading wealth management company with more than 3.4 million customers across Australia and New Zealand. Aussie stock AMP is a popular blue chip stock and is one of the major movers on the ASX.

It is Australia’s largest retail and corporate superannuation provider, and one of the region’s most significant investment managers.

AMP offers a wide range of financial products and services, including: retirement savings and income; investments; superannuation; financial planning; insurance; and banking.

After bouncing back in 2009 after a disastrous 2008, AMP has encountered further challenges in 2010 on fears of a global economic slowdown.

The group released its 2009 results earlier this year, which failed to move market sentiment.

Today, AMP released its 1H10 results. The group’s closely-watched underlying earnings result was below market expectations, being impacted by higher insurance claims and a decline in profit from AMP’s mature business.

All of AMP’s divisions showed weakness in 1H10, except for its New Zealand division, and the group is forecasting continued investment market difficulty in 2H10.

Credit Crunch Cloud

Towards the end of 2007, AMP encountered problems, care of the high volatility flooding the Australian equity market.

AMP went into damage control in late 2007 and 2008 as its stock slumped, taking careful steps to maintain its “A”-range credit rating.

The company soldiered through the credit crunch by bypassing acquisitions in order to reduce debt and pay out capital returns to shareholders.

AMP looked ready to turn it all around last year, in line with the growth displayed by most companies (including finance companies) on hopes of a global economic rebound.

Renewed Investment Jitters

Coming into 2010, AMP’s stock became sluggish on renewed fears of a global economic downturn.

In February, AMP released its results for 2009, failing to move market sentiment much either way.

Net profit rose to $739 million from $580 million in the prior year, whilst underlying profit was down 5% at $772 million.

Revenue from ordinary activities came in at $10.92 billion, swinging from a loss of $10.97 billion the prior year on the back of net investment losses.

AMP kept its dividend steady at 16 cents per share, contributing to a result that both AMP and a major broker noted was roughly in-line with forecasts.

AXA Deal Dragging

Market focus on AMP has for a long time revolved around its bid for AXA Asia Pacific Holdings, which has also been a takeover target for other suitors.

In May, AMP said there is a long way to go in its proposed purchase of AXA. The company admitted to still needing final approval from Treasurer Wayne Swan, though the ACCC has not blocked AMP’s bid.

AMP is looking to AXA APH’s independent directors and minority shareholders for proposal support after the ACCC blocked National Australia Bank’s (NAB) counter-bid for AXA.

With today’s 1H10 results release, AMP failed to release any encouraging news on the proposed takeover.

The group noted that AXA still remains strategically attractive, though the market is of the opinion that NAB will eventually win AXA.

Underlying Earnings Aches

AMP today disappointed the market by reporting 1H10 results which fell short of expectations.

Net profit for the half rose 17.4% to $425 million on growth initiatives, and ahead of analysts’ forecasts for around $383.4 million.

Of more concern was AMP’s underlying profit result of $383 million. Though this was up from $367 million in the same half a year ago, it was below market expectations for around $420 million.

AMP declared a half dividend of 15 cents per share, compared to a dividend of 14 cents a year ago.

A deeper look into AMP’s results highlighted several challenges. All of AMP’s divisions showed weakness for 1H10, except for its New Zealand business.

Also evident was the impact of a government crackdown on fees in the domestic pension fund industry. As one of Australia’s largest pension fund managers, AMP has had to respond to the crackdown by rolling out new products.

However, the potential benefits of these new products will not likely be seen in the near-term.

AMP said that investment markets are likely to remain challenging in 2H10 and added it was too soon to give guidance for the full year.

The one upside was cost guidance. AMP expects costs in the Australian Financial Services division to rise just 3% in 2010, down from a prior forecast for 4%-5% higher costs.

Outlook

Like many global equities – and not just those pertaining to the finance sector – AMP has seen its fair share of trials coming into 2010.

Renewed fears of a global economic slowdown has dragged on AMP, which is also battling a government crackdown on fees in the domestic pension fund industry.

AMP’s 1H10 results failed to impress investors today. The underlying earnings result was below analysts’ expectations. It is evident that AMP has suffered a difficult half on higher insurance claims and a decline in profit from its mature business.

All of AMP’s divisions showed weakness in 1H10, except for its New Zealand division.

Unfortunately, going ahead AMP expects to see further challenges. The company anticipates investment markets to remain troubling in 2H10, and for this reason AMP has declined to give specific full year outlook guidance.

AMP share price has suffered over the course of one year falling from as high as $6.97 to as low as $5.09 in yesterday’s session. However, if a break through below $5.00 key support is confirmed then further weakness may result.

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AXA Asia Pacific (AXA) is a diversified financial services company that has been operating in Australia for over 100 years.

The company’s main products are spread across investments, insurance, retirement and superannuation

AXA recently confirmed a 19% fall in 1H10 net profit to $219.2 million, from $270.4 million a year earlier.

The result was affected by a $16.5 million loss in investment earnings, as operating profit actually rose 6% to $270.3 million.

AXA reported the strongest growth in its South East Asian operations, which were characterised by an increase in sales and fee revenue.

AXA also declared an interim dividend of 9.25 cents, which was unchanged from last year.

AXA has been one of the hot stocks in recent months following a takeover offer from NAB, and will be one of the stocks to watch in coming months as a resolution to the takeover nears.