Asia-focused FTSE 100 bank Standard Chartered (LSE: STAN) has given investors a rough ride with the stock still trading 50% lower than it was five years ago. Those who bought recently hoping to pick up a bargain have been punished by a further dismal year. That could now change.
Low Standard
Its stock is down around 2% today after publication of its 2018 final results, despite group chief executive Bill Winters hailing “significant improvement in profitability driven by higher quality income growth with cost and asset origination discipline.” He also bigged up the “tremendous progress securing the foundations of the business since 2015,” resulting in a third successive year of underlying profit growth.
There are plenty of positive numbers, with operating income up 5% to $15bn and $3.2bn in gross cost efficiencies, exceeding the target set in November 2015. Net interest income increased 8% while credit impairment fell 38% to $740m. Underlying profit before tax rose 28% to $3.9bn.
Chartered waters
Standard Chartered also strengthened its balance sheet, lifting its CET1 ratio 60 basis points to 14.2%, which should boost its resilience to economic shocks. There could be plenty of those amid fears of a global recession, with China and Asia particularly vulnerable, and the US trade war that has been hurting for some time.
Basic earnings per share increased 14.2 cents to 61.4 cents, and the board rewarded loyal investors by hiking the final dividend 36% to 15 US cents. Standard Chartered now offers a forecast yield of 3.6% with cover of 2.8. It still trades at a bargain price of 9.7 times forecast earnings, which looks promising with forecast earnings growth of 20% in 2019, and 11% the year after.
Like every bank, Standard Chartered remains a work in progress and is also vulnerable to wider economic troubles. However, my colleague Roland Head reckons its recovery could have further to run.
Chemicals reaction
Speciality and industrial chemicals manufacturer Croda International (LSE: CRDA) has had a solid year, rising almost 12% in 12 months, against just 1.8% across the FTSE 100 as a whole. Over five years, it’s up 100%.
Today, it published its results for the year ended 31 December 2018 and the stock fell 3% in response as pre-tax profits rose just 1% to £317.8m, with revenues also up 1% to £1.39bn. Core business sales were 3.8% higher at constant currency at £1.27bn. But it was hit by adverse FX movements, as currency translation reduced sales by £26.2m and adjusted pre-tax profit by £8.7m.
It did grant investors a special dividend of 115p per share, totalling £150m, alongside a 7.4% increase in the full-year ordinary dividend to 87p. Croda is a relative low yielder at 1.9% with cover of 2.1 but at least management policy is progressive. It could also deliver growth over the long term.
Front Foots
Chief executive officer Steve Foots hailed “another year of strong progress” as Croda once again delivered “top line growth at industry leading margins to achieve superior returns.” He also highlighted “relentless innovation and by investing in disruptive technologies and exciting new growth opportunities,” although our old friend “challenging global market conditions” also got a mention.Â
Croda looks a bit expensive, though, trading at 24.7 times forecast earnings, with a PEG of 3.1. Forecast earnings growth nonetheless looks steady at 8% in both 2019 and 2020, and a return on capital employed of 34% suggests a well-run operation.