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Results analysis: Scottish Oriental Smaller Companies

SST’s tilt toward India has contributed to a strong set of results this year…
Thomas McMahon
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Updated 21 Oct 2021
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Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Scottish Oriental Smaller Companies. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

  • Scottish Oriental Smaller Companies (SST) has reported strong absolute returns for the year ending 31/08/2021 delivering NAV total returns of 28.4% compared to a loss of 13.2% in FY 2020. SST is not managed to a benchmark, but the results compare to total returns of 14.7% for the MSCI AC Asia ex Japan Index and 37.8% for the MSCI AC Asia ex Japan Small Cap Index.
  • The board has maintained the dividend at 11.5p, using a contribution from the revenue reserves to do so. Earnings per share rose from 8.2p in 2020 to 9.0p in 2021.
  • Following the impact of the pandemic, the management team estimates the median forecast EPS growth on the portfolio will be 21.5% per annum for the next two years, illustrating the strength of the recovery coming through at the company level.
  • SST has long had a significant position in Indian companies based on the managers’ view of company-level fundamentals rather than a call on the market. In FY 2021 this benefitted the trust as the Indian market performed strongly. Many of the trust’s top performers are listed in that country, including IT services company Mphasis, real-estate developer Mahindra Lifespaces and auto component manufacturer Mahindra CIE Automotive.
  • In FY2020 the manager, FSSA Investment Managers, implemented some reforms to the process aimed at improving performance. Amongst other things this saw the trust take on gearing which has been helpful in a rising market.
  • The portfolio at the end of the year displayed higher return on equity and earnings growth expectations than the market. The chairman comments: “Despite the present background of concerns about China … [the managers] … are enthusiastic about the outlook for the companies in our portfolio. We share that optimism.”

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Scottish Oriental Smaller Companies 01 December 2021

About the Author

Thomas McMahon
[email protected]
Thomas is Investment Trust Research Manager and joined Kepler in April 2018. Previously he was senior analyst at FE Invest, where he was responsible for fund selection for a range of model portfolios. He covered all asset classes over time, but has particular experience with emerging markets and fixed income as well as UK smaller companies funds. He has a degree in Philosophy from Warwick University and is a CFA charterholder.

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