RCS - Schroder Orientl Inc - Results analysis from Kepler Trust Intelligence

Schroder Oriental Income FundAnnouncement

Thu 15:45

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RNS Number : 8522J  Schroder Oriental Income Fund Ltd  22 May 2025

Schroder Oriental Income (SOI)

22/05/2025

Results analysis from Kepler Trust Intelligence

Schroder Oriental Income (SOI) has released its interim results for the six
months ending 28/02/2025. Over the period, the trust saw a NAV total return of
2.5%, compared to a return of 10.4% for the trust's benchmark, the MSCI AC
Pacific ex Japan Index.

Relative performance was affected by manager Richard Sennitt's underweight to
China, although he narrowed this by adding to some of the country's
highest-quality names in the weakness. The manager also initiated an
off-benchmark position in Indian company Power Grid in the period.

To offset the China risk, Richard is overweight Hong Kong which was a
positive, as was stock selection in Taiwanese tech, plus an overweight to both
Singapore and financials.

Long-term returns remain strong, with a five-year return more than double that
of the index to the end of the period. Since then, the region has been hit by
tariff-induced volatility although SOI has delivered positive absolute returns
since.

Revenue was down slightly versus last year, albeit just by 1.3%. SOI typically
pays an increased final dividend each year which, should it be raised again,
will lead to the AIC's dividend hero status. The trust has substantial
reserves which the board has indicated could be used to support this.

Gearing remains stable across the period and contributed a small net positive
to performance.

New chairman, Nick Winsor, reflected on navigating the region's challenges,
stating: "Our strategy of investing in income producing companies with strong
balance sheets that can successfully navigate these challenges has never felt
more relevant."

Kepler View

Schroder Oriental Income (SOI) has a strong long-term track record of
cumulative outperformance of the benchmark. Despite this, the short-term
period covered by these results was more challenging. However, considering the
rally in SOI's key underweight, China and growth outperforming value, we
believe the positive absolute return should be viewed favourably. This is
especially true when considering the strong share price returns led to the
discount narrowing. Furthermore, performance post period end has been strong,
with SOI having navigated the volatility post-Liberation day well.

The board has indicated it wishes to extend the dividend growth track record
to 20 years, and therefore achieve the AIC's 'dividend hero' status. Should it
do so, it will be the first Asian focussed trust to achieve the feat. The
trust has sizeable reserves to help support this.

The changes amongst peers is also interesting, in our view. Several peers have
adopted some form of enhanced dividend strategy, leaving SOI as a rare
'natural' income payer. As such, the trust's portfolio profile may diverge
from peers going forward due to the valuation-discipline required. We believe
the trust could therefore offer important portfolio diversification benefits
in the future.

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