Watts, whose holding in SJP has jumped to 3% from 1.5% of his £1bn fund since Lloyds placed part of its stake back on the market, said the firm’s commission rebate structure was deemed to be RDR-compliant and the number of partners continues to grow.
Lloyds is also rumoured to be looking to sell Scottish Widows Investment Partnership, with Threadneedle parent Ameriprise Financial a potential suitor with an £800m bid up its sleeve.
In SJP’s annual results, released in February, the company said the number of partners was up 8% at the end of 2012 compared with the end of 2011 at 1,788.
Meanwhile the business saw net new client inflows of £3.35bn versus £3.21bn in 2011, which was supported by a client retention rate of 95%. This, alongside positive market performance took total funds under management up to £34.8bn.
Reliable income stream
An another attractive element of the business model, Watts added, was the fact that a third of assets under administration were not yet earning a fee and are expected to become cash generative only once they reach the end of their sixth year invested.
SJP says in its trading statements this deferral of cash is designed to make sure the business always has six years’ worth of funds in the"gestation period" and therefore is less reliant on new business flows.
Watts said it would drive strong and organic profit growth in a company that is sitting on a reasonable valuation multiple, generating attractive returns for shareholders. The 33% dividend increase in each of the past three years is not to be sniffed at either.
Good news to continue
“For the next three quarters at least the news flow will continue to be good. We never have price targets on the share but when I look at the concept of embedded value and the fact 70% of assets under administration are in equity type products when we are bullish on equity markets I think we could consistently see 25% earnings per share growth.”
Earlier this year Portfolio Adviser reported SJP was bucking the industry-wide decline in approved persons, while the wealth manager’s swarm of applicants for its training academy was also of interest.
