The Lemon Fool

Completion of Solutions Business Acquisition

Further to the announcement on 26 October 2021, Schroders plc confirms that all necessary regulatory and shareholder approvals have now been received and the acquisition of the UK Advisory, Fiduciary Management and Derivatives business of River and Mercantile Group PLC completed on 31 January 2022.

https://www.investegate.co.uk/schroders ... 01562282A/

I hold the non voting shares of this firm, for the higher dividend yield they offer, and intend topping up my holdings over the coming months.

Ian.

Partial Withdrawal of Letter of Intent

Acquisition of Air Partner plc and disposal by the Company of Wheels Up UK Limited

On 27th January 2022, Schroder Investment Management Limited provided a Letter of Intent regarding its intentions in relation to 6,900,000 shares.

In accordance with The City Code on Takeovers and Mergers, Rule 2.11 (d)(i), we advise that, subject to clause 2.6 of the letter of intent, we have disposed of 600,000 shares, and are no longer in a position to accept or procure the acceptance of the Offer, in relation to those shares.

https://www.investegate.co.uk/schroders ... 37563619A/

https://international-adviser.com/china ... t-venture/

"The China Banking and Insurance Regulatory Commission (CBIRC) has given the green light to a joint venture between UK-based asset manager Schroders and Shanghai-headquartered Bank of Communications (BOCOM) Wealth Management."

monabri wrote:https://international-adviser.com/china-approves-schroders-wm-joint-venture/

"The China Banking and Insurance Regulatory Commission (CBIRC) has given the green light to a joint venture between UK-based asset manager Schroders and Shanghai-headquartered Bank of Communications (BOCOM) Wealth Management."

Thanks for the heads up. I cannot, just now, think of a single Western based business that's ever made serious money from Chinese JVs. Usually in my experience, knowledge flows one way and the money stays with the Chinese JV partner. All that really happens is the Chinese get the knowledge they want while the Western company carries all the risk.

BullDog wrote:

monabri wrote:https://international-adviser.com/china-approves-schroders-wm-joint-venture/

"The China Banking and Insurance Regulatory Commission (CBIRC) has given the green light to a joint venture between UK-based asset manager Schroders and Shanghai-headquartered Bank of Communications (BOCOM) Wealth Management."

Thanks for the heads up. I cannot, just now, think of a single Western based business that's ever made serious money from Chinese JVs. Usually in my experience, knowledge flows one way and the money stays with the Chinese JV partner. All that really happens is the Chinese get the knowledge they want while the Western company carries all the risk.

Well, the JV is so inconsequential that the company didn't feel it enough to even issue a RNS!

simoan wrote:

BullDog wrote:

monabri wrote:https://international-adviser.com/china-approves-schroders-wm-joint-venture/

"The China Banking and Insurance Regulatory Commission (CBIRC) has given the green light to a joint venture between UK-based asset manager Schroders and Shanghai-headquartered Bank of Communications (BOCOM) Wealth Management."

Thanks for the heads up. I cannot, just now, think of a single Western based business that's ever made serious money from Chinese JVs. Usually in my experience, knowledge flows one way and the money stays with the Chinese JV partner. All that really happens is the Chinese get the knowledge they want while the Western company carries all the risk.

Well, the JV is so inconsequential that the company didn't feel it enough to even issue a RNS!

They issued an update on their website.

https://www.schroders.com/en/media-rela ... operating/

Let's hope that the increasing number of middle class Chinese investors spread their investments to UK Companies.

monabri wrote:They issued an update on their website.

https://www.schroders.com/en/media-rela ... operating/

Let's hope that the increasing number of middle class Chinese investors spread their investments to UK Companies.

Not holding my breath. And with the CCP seemingly destroying everything that was decent and relatively democratic about Hong Kong, the investor numbers might even drop. On the upside, there's plenty of educated, hard working Hong Kong residents coming to the UK presently. I welcome them with open arms. They're the more likely customers of Schroders, in my opinion.

monabri wrote:They issued an update on their website.

https://www.schroders.com/en/media-rela ... operating/

Let's hope that the increasing number of middle class Chinese investors spread their investments to UK Companies.

I agree but need a bit more than hope to invest! If the company felt this was price sensitive and accretive to profits they would have to RNS it and they didn't. I opened a position in Schroders last week based on fundamentals, not this news

All the best, Si

simoan wrote:

monabri wrote:They issued an update on their website.

https://www.schroders.com/en/media-rela ... operating/

Let's hope that the increasing number of middle class Chinese investors spread their investments to UK Companies.

I agree but need a bit more than hope to invest! If the company felt this was price sensitive and accretive to profits they would have to RNS it and they didn't. I opened a position in Schroders last week based on fundamentals, not this news

All the best, Si

This is the next step to creating a standalone business WITHOUT a Chinese partner (*). I'm surprised that they didn't release a RNS regarding the Joint Venture news and have been in touch with Investor Relations to that effect. They were non committal and merely offered to add me to their news distribution address list. Surely they (SDR) are venturing into China to make money - perhaps they are being prudent regarding profitability or perhaps it is just too early?

In November last year (**) I was wondering whether Schroders had finally received approval to operate independently in China as several months (from March to November 2021) had passed. I've not seen an update (not saying there isn't one).

I've held shares in SDRC since early 2018, coming up to 4 years and "topped up" very recently. Attractions for me being
- margins (gross 80%, operating 20%)
- no debt
- Calculations of DCF indicate an undervaluation
- a respectable yield (not too big, not too small)
- no "Covid cuts" to the dividend
- no share dilutions (10 yr period)
- looking to expand into Asia as a response to a desire to grow.
- no reported PDMR sales of shares

Downside
- they are a bit slow off the block compared to much bigger resourced Blackrock (and another company) getting into China.
- revenues are stalling in the last 5 yrs
- ROE dropping from a steadyish 17% (7 years) to ~13% in the last 3 years.
- PER @ 16 is higher than industry average (but that might reflect the relative perception compared to other asset managers)
- ROCE <4% (is this measure applicable?)
- no reported PDMR buying of shares

At the moment though, I would suggest (views solicited) that SDR are marking time. The earnings growth forecasts over the next 3 years are positive but not "strong" (~7% per annum). The stalled dividend growth is a concern (***)



(*) I refer back to news in The Times March 5th 2021. "Schroders is set to expand more aggressively in China by becoming the first British fund manager to operate there without a local partner. It already has a joint venture with the Bank of Communications in China, but now it plans to open a standalone entirely Schroders-owned business in the country."

(**) viewtopic.php?p=455063#p455063


(***) https://www.dividenddata.co.uk/dividend ... y?epic=SDR

simoan wrote:
I opened a position in Schroders last week based on fundamentals, not this news
All the best, Si

Did Schroders make it onto the "Give Me Strength" screen?

viewtopic.php?p=436181#p436181

Another positive for me is the large holding by the Schroder family. I suppose getting in to China is a good thing although not sure if it is so good for investors. Look at Baillie Gifford China Growth. Currently that is a misnomer.

I have held for about ten years or so.

Dod

monabri wrote:

simoan wrote:
I opened a position in Schroders last week based on fundamentals, not this news
All the best, Si

Did Schroders make it onto the "Give Me Strength" screen?

viewtopic.php?p=436181#p436181

No, it never will qualify because of the very low ROCE and CROIC. Hargreaves Lansdown and other financials do qualify currently (incl. IG Group, CMC Markets, AJ Bell, Numis, Jupiter and Ashmore). Even if you ignore ROCE and CROIC, and just screen by ROE it is still bottom of the heap! I did not buy with a great deal of conviction it has to be said, and have only taken a small initial position ahead of results on 5th March. It looks cheap if they hit their FY21 numbers (PER = 9) and decent FCF yield.

All the best, Si

Schroders is a conservative well run operation but like many active fund managers their fees are under pressure. However as part of a conservative income portfolio I am happy to hold.

I am not expecting any fireworks with the annual results in March.

Dod

Dod101 wrote:Schroders is a conservative well run operation but like many active fund managers their fees are under pressure. However as part of a conservative income portfolio I am happy to hold.

I am not expecting any fireworks with the annual results in March.

Dod

I agree Dod. I'm happy to hold SDRC too, and intend topping up my holdings soon, maybe even next month?

Ian.

For a high quality dividend stream, SDRC is starting to look like a very good buy to me. Looks like at today's price we're getting nearer to pandemic style yield and valuation. Sorely tempted to top up my modest holding which I previously purchased at this kind of valuation.

BullDog wrote:For a high quality dividend stream, SDRC is starting to look like a very good buy to me. Looks like at today's price we're getting nearer to pandemic style yield and valuation. Sorely tempted to top up my modest holding which I previously purchased at this kind of valuation.

You'd expect the share price of fund managers to be highly correlated to stock market movements, so I'd suggest it could get a lot cheaper yet. FY21 results, which will provide a more up to date outlook for FY22, are only a week away, so I see no need to rush to buy whilst we're in an information vacuum.

All the best, Si

simoan wrote:

BullDog wrote:For a high quality dividend stream, SDRC is starting to look like a very good buy to me. Looks like at today's price we're getting nearer to pandemic style yield and valuation. Sorely tempted to top up my modest holding which I previously purchased at this kind of valuation.

You'd expect the share price of fund managers to be highly correlated to stock market movements, so I'd suggest it could get a lot cheaper yet. FY21 results, which will provide a more up to date outlook for FY22, are only a week away, so I see no need to rush to buy whilst we're in an information vacuum.

All the best, Si

Thank you. I appreciate the comments. I do have a tendency to buy a story too early and it's no bad thing you passed the comment you did. Cheers.

BD

BullDog wrote:

simoan wrote:

BullDog wrote:For a high quality dividend stream, SDRC is starting to look like a very good buy to me. Looks like at today's price we're getting nearer to pandemic style yield and valuation. Sorely tempted to top up my modest holding which I previously purchased at this kind of valuation.

You'd expect the share price of fund managers to be highly correlated to stock market movements, so I'd suggest it could get a lot cheaper yet. FY21 results, which will provide a more up to date outlook for FY22, are only a week away, so I see no need to rush to buy whilst we're in an information vacuum.

All the best, Si

Thank you. I appreciate the comments. I do have a tendency to buy a story too early and it's no bad thing you passed the comment you did. Cheers.

BD

Please don't take my comment as advice! I was just pointing out that we've had no real management comment to go on since the HY21 results last July; the Q3 trading update in October was basically just an update on AUM. BTW the pandemic lows were around the £15 level.

Take care out there! Si

simoan wrote:

BullDog wrote:

simoan wrote:

BullDog wrote:For a high quality dividend stream, SDRC is starting to look like a very good buy to me. Looks like at today's price we're getting nearer to pandemic style yield and valuation. Sorely tempted to top up my modest holding which I previously purchased at this kind of valuation.

You'd expect the share price of fund managers to be highly correlated to stock market movements, so I'd suggest it could get a lot cheaper yet. FY21 results, which will provide a more up to date outlook for FY22, are only a week away, so I see no need to rush to buy whilst we're in an information vacuum.

All the best, Si

Thank you. I appreciate the comments. I do have a tendency to buy a story too early and it's no bad thing you passed the comment you did. Cheers.

BD

Please don't take my comment as advice! I was just pointing out that we've had no real management comment to go on since the HY21 results last July; the Q3 trading update in October was basically just an update on AUM. BTW the pandemic lows were around the £15 level.

Take care out there! Si

Indeed, fully understood, but thanks anyway.

BD