The Investment Column: Bank sector's woes outweigh merits of Standard Chartered

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The Independent Online

Our view: Sell

Share price: 1,453p (-116p)

Cat Stevens once wrote a famous song about the wild world. Standard Chartered reckons it is getting wilder as the global financial downturn bites and financial institutions announce more writedowns, and subsequent rights issues to firm up balance sheets. The bank, probably the biggest in the UK that most people have never heard of because it makes 90 per cent of profits in Asia, says it is different.

The group does concede inflation in the emerging markets is a worry and that, while Asia will at least feel the effects of the US sub-prime crisis, it will be nowhere near as bad as in the West. As such, group finance director Richard Meddings, says it is full steam ahead. The group will continue to invest in its Asian infrastructure: capital raising is the last thing on the bank's mind.

This should be music to investors' ears, especially when they consider that the analysts at Cazenove say the group trades at 12.9 times its estimated 2008 price earnings ratio; an 8 per cent discount to the banking sector.

However, it just is not as clear cut as that. Yes, the bank is doing all the right things, such as spreading itself across wholesale and consumer banking as well as its markets business. Yes, it is undoubtedly operating in the most vibrant geographical locations and yes, its trading update published yesterday, said that first performance was "very strong".

Investors, though, would be mad to buy the stock. There is nothing wrong with the bank, but, while Mr Meddings will not comment on whether the shares are being dragged down by the rest of the market, this is what is happening. Lethal banking stocks are being avoided for fear of unexpected bad news and Standard Chartered is being left behind as the herd runs away. Sell.

United Business Media

Our view: Buy

Share price: 548.5p (-31.5p)

United Business Media, which last week walked away from talks to buy its rival Informa, issued a mixed trading statement yesterday: the performance of its biggest money-spinner, its events business, will be broadly similar to last year. Publishing could be a bit trickier. The key, says chief finance officer Nigel Wilson, is convincing investors the business model is sound.

Landsbanki reckons so. The analysts say: "UBM's shares trade at a discount to the more indebted peer group. We expect the current economic outlook and market sentiment to hinder the shares from reaching that level in the next six to 12 months. Accordingly, we have set our target price at 660p, which offers 15 per cent upside potential." They say the courting of Informa was opportunistic and the increase in the target's share price, on speculation of third-party interest, rendered the merger uneconomic.

UBM trades at 10.2 times 2008 earnings, versus an average of 12.9 times for the peer group. Investors keen to buy, and they should be, will note speed is of the essence: the shares grew by 11 per cent in the last three months, against the sector, which saw a 9 per cent fall.

However, while watchers at Landsbanki are upbeat, they are concerned that yesterday's trading update, which stated first-half results would be "modestly ahead of market expectations", did not explicitly say full-year numbers would meet the market's targets. Mr Wilson says the group cannot discuss items not in the prospectus outlining the company's tax domicile move to Ireland.

This is a good company that was wise enough to withdraw from the bidding for Informa when the going got a bit too tough. The shares are cheap and the market is realising that. Buy now to avoid disappointment.

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