Schroders: Flat Earnings Growth for FY22 Despite AUM Tailwind From Acquisitions; Attractively Valued

Narrow-moat Schroders recently reported excellent results for its 2021 fiscal year, with a 25% year-on-year increase in net income. We have updated our model, and we now expect flat earnings growth for 2022. While acquisitions will provide a tailwind to assets under management, Schroders guided for lower performance fees and elevated non-compensation costs for 2022. The decline in management fee margins has started to slow down, and we anticipate this to continue. Mainly due to some technical changes in our model, we reduce our fair value estimate slightly to GBX 4,000 per share from GBX 4,100 previously. Schroders is currently trading at 0.8 times our fair value estimate, and at 15 times 2022 earnings it is trading at a discount to the 18 times earnings it has traded at over the past 10 years.