UBS adds Schroders to 'Key Calls' list

25th Feb 2016 11:39

(ShareCast News) - UBS added Schroders, which it rates at 'buy' with a 2,800p price target, to its 'Key Calls' list despite the headwinds facing UK asset managers, as the stock is currently undervalued."We expect the firm to benefit from its well-diversified product mix, as well as its strong distribution channels in Europe, Asia and the US."The bank said its Evidence Lab survey of institutional investors showed Schroders' exposure to equities and multi-asset-class products positions it favourably to attract institutional investor flows this year.UBS sees 400 basis points of EBITDA margin expansion through 2017 and argued that despite the difficult operating environment, Schroders should be able to improve EBITDA margins in the next two years to 42% from 38% currently.It reckoned around 150 basis points would come from the wealth management business and the rest from a mix shift among institutional clients into higher-margin products.The bank said that of the institutional investors surveyed by UBS Evidence Lab, 61% and 53% expect to increase their mandates to equity and multi-asset class products, respectively, in 2016 , while reducing exposure to fixed income."Schroders looks well positioned from a product mix perspective to benefit from these flows, as equities and multi-asset account for 75% of its AUM as of September 2015."At 1144 GMT, Schroders shares were up 2.1% to 2,524.00p.