Standard Chartered worth considering

MyTravel may be going too far; Buoyant Rotork looks fully valued

The residents of Hong Kong have maxed out on their credit cards in recent years, thanks to a more lenient bankruptcy law and curbs on effective credit checking by card issuers. That combination of unfortunate legislation has sent personal bankruptcies in the former colony sky high, and Standard Chartered, one of the territory's biggest lenders, has been picking up a part of the tab.

The bank tried to boast yesterday that it was one of the first to spot the problem, but it still had to raise provisions against bad debts by $150m (£95m) in the past six months. This was the second set of figures where the issue has dented profits, and there seems at least another six months of woe still to come.

The issue is at least now well understood by the stock market, which has brought Standard Chartered's share price back by a quarter in the past three months. In fact, the stage may be set for a strong rebound by the stock.

When Rana Talwar walked out of his job as chief executive last year after a boardroom bust-up, his successor, Mervyn Davies signalled a change in emphasis at the Asia-focused banking giant: enough Eastern promise, now some Eastern delivery.

Mr Davies has elected to focus on shareholder returns. The number to look for is the return on equity, which stood at 12.8 per cent in the six months to 30 June, up from 9.3 per cent in the previous six months but a long way from the 20 per cent target. The shares should mirror Mr Davies' progress over the medium term.

Profits were modestly up on the same period last year, and well up on the previous six months, so momentum is with the company. An economic recovery in Asia appears to be taking root, and a focus on cost control has pulled the Thai and Taiwanese divisions into profitability. There is also strong growth in India and Pakistan and in the Middle East.

The worry, of course, is that the most exciting areas of expansion are also potential war zones. Its foothold in China also puts it in the high-risk, high-return category. Standard Chartered is always going to be a racy investment, though a dividend yield of 4.4 per cent should help investors sleep at night. The stock is worth considering.

MyTravel may be going too far

MyTravel has had a turbulent year. What with the name change from Airtours, the fallout from 11 September, the victory against Brussels (for blocking a now defunct takeover of rival First Choice) and the departure of its founder; it's little wonder the tour operator has struggled to maintain cruising height.

You might think that handling the threat of another Gulf War, bedding down a new management team, and shifting a mountain of unsold holidays would keep the group's rookie chief executive Tim Byrne busy, but no – MyTravel has opted to take on the might of easyJet with its own budget airline.

Strategically, the move looks sound enough. The no-frills market has yet to dent the national enthusiasm for a cheap package deal, minimising the risk that MyTravelLite, the airline's name, will cannibalise core holiday sales. But analysts question whether the new project is not one distraction too many for a company that still has plenty to prove to the market.

Although a trading statement last month showed that MyTravel was making up ground lost after a profits warning in May, the group still has to negotiate the rest of the key summer season. Mr Byrne's future will hang on the strength of the "lates" market – deals booked at the last minute. In July, he said bookings had improved from running 8 per cent below last year in May to being just 5 per cent behind, helped by the dismal summer and the end of the World Cup.

Meanwhile, the group's disastrous German unit, which is still losing money, remains adrift in the country's worst year in memory for holiday companies. Bullish analysts point to the possibility of a tie-up with First Choice but neither group has cash to burn and on current valuations, MyTravel shareholders would find the notion hard to stomach.

The shares, down 1.5p to 138p, may look cheap but investors would find better value in a one way MyTravelLite ticket to Malaga.

Buoyant Rotork looks fully valued

For an engineering firm, life at Rotork is rosy. The industrial taps company does not count among its customers the sorts of companies whose investment spending ebbs and flows with the economic tide. It supplies oil and gas explorers, water companies and the power sector. But while it is in the pink, the picture is not as rosy as it looked just a few months ago.

The company overestimated the orders from its oil and gas customers (which account for 40 per cent of the business) for equipment used in downstream activities such as refining. Sure, all the majors, such as BP and Shell, are raising production upstream, where the oil and gas actually comes out of the ground, but demand for Rotork's products in the US and Europe was a weak spot in yesterday's results for the half-year to June.

The company has also previously overstated the sales to be had in the US power market, where the shortages seen in California were, it was hoped, going to trigger a massive programme of power station building.

The company is confident that new product developments will keep sales buoyant and offset the weakness of the US dollar, and yesterday's results were still creditable. They showed a 10 per cent rise in pre-tax profits to £12.1m, on turnover up 13 per cent to £65m. With strong cash flows expected in the second half of the year (an acquisition in January led to an outflow for the first half), a chunky dividend should underpin the shares despite the uncertainties. But up 4.5p to 317p, they are fully valued.