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Daily Grime - Schroders (SDR)/River and Mercantile (RIV)

ByJeremy Grime
Published 15/10/2019, 08:29
Updated 09/07/2023, 11:32

Schroders (LON:SDR) – Q3 Update

Share Price 2930pMkt Cap £9560mConflict Disclosure: No Holding
  • News No information on flows. Just a 9 month number confirming that AUM is now £451m, up 10.8% from £407m on 1 January. No commentary provided. At the half year in June AUM was £444m so they are up 1.6% since then. In H1 the AUM rose 9.1% despite the company suffering net outflows. There would appear to be no reason to suggest this pattern of outflows and market gains has changed.
  • Estimates Pre tax of £548m is expected in the current year, rising 8% next year to £591m. EPS 196p, and 214p in 2020.
  • Valuation PER 15X, Yield 3.9%. Mkt Cap/AUM 2.1%
  • Conclusion There has to be better things for an active manager to own.

River and Mercantile Group (LON:RIV) – FY Results

Share Price 250p

Mkt Cap £213m

Conflict Disclosure: No Holding

  • Results Adjusted underlying PBT down 8.7% to £14.7m and EPS down 13.5% to 13.9p while AUM growth was 18% to £39.8bn. Adjusted PBT was down 4.1% to £20.9m. The adjusted underlying number includes remuneration classified as “investment remuneration”, while it is stripped out of the adjusted number. Management fees increased 2% to £65.6m while performance fees were £12.5m against £10.6m in the prior year. Within this Management fees of £55.5m on AUM were up 3% while advisory fees were down 3% to £10m. The narrative refers to the sharp increase in activity in fiduciary management that is occurring post the CMA review while (as confirmed by XPS) there is no growth in the advisory fee market.

  • Estimates The outlook guides to lower performance fees in 2020 and reducing the management fee guidance by 1bp to 14-15bps. However the phasing of the AUM growth towards the end of the year bodes well and the outlook is confident. Forecasts anticipate PBT of £18.8m. This compares to £20.9m adjusted or ££14.7m adjusted underlying, whichever we care to look at.

  • Valuation On existing forecasts the PER is 13.9X and the yield is 6.3% from a dividend 1.1X covered. PER 13 and yield 4.4%

    • Conclusion The investments into New York and Australia are set to continue and I sense this company is coming out of a period of investment. With buoyant markets in fiduciary management (albeit with fee competition) on the back of the CMA review requiring re tendering this company looks set to prosper over the next couple of year. If it traded on 18X it would be 320p.

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