Is There Still Time To Buy Standard Chartered PLC?

Can Standard Chartered PLC (LON: STAN) move higher, or are the company’s shares overvalued?

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Right now I’m looking at some of the most popular companies in the FTSE 100 and wider market to try and establish if there is still time for investors to buy in.

Today I’m looking at Standard Chartered (LSE: STAN) (NASDAQOTH: SCBFF.US) to ascertain if the company’s share price has the potential to push higher.

Current market sentiment

The best place to start assessing whether or not Standard’s share price has the potential to push higher, is to take a look at the market’s opinion towards the company. Unfortunately, it would appear that at present, the market is not pleased with Standard, as the bank has made a number of mistakes during recent months.

stanIndeed, a combination of poor performance at Standard’s Korean operations, along with a rise in loan impairments hit the bank’s 2013 profit. A combination of these, as well as other factors, led to Standard reporting a double-digital decline in earnings for 2013, the first full-year decline since 2001.

Additionally, some investors have expressed concern that the bank could be running out of cash. However, these concerns were allayed to some extent when the bank reported a tier one capital ratio of 11.8% at the end of 2013, up from 11.7% reported at the end of 2012. 

Upcoming catalysts

Standard’s management remains upbeat about the future and believes the problems that held the bank back during 2013, should resolve themselves during 2014. Nevertheless, Standard’s management has lowered the group’s growth targets for the next few years but many of Standard’s markets are still reporting strong growth. For example, income from Hong Kong rose 11% during 2013, thanks to strong mortgage growth and higher margins.

What’s more, the bank’s management is focusing on asset disposals within non-essential counties and markets, regions where the bank does not have a significant presence. Management are also looking to reduce operating costs across the business.


Standard’s poor performance during 2013 has weighed on the bank’s share price to such an extent that at present levels, Standard’s shares are now trading at their lowest valuation in almost a decade.

Indeed, apart from a few months during the financial crisis, when the whole financial services industry was trading at rock bottom valuations, Standard’s shares have traded at an average forward P/E of 13 during the past decade. However, at present Standard is only trading at a forward P/E of 9.2.

This rock bottom valuation makes the Standard’s shares some of the cheapest within the banking sector, with City analysts currently predicting earnings growth of 26% during 2014, it would appear that this discount to peers is unwarranted.  

Foolish summary

So overall, I feel that there is still time to buy Standard Chartered.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert does not own any share mentioned within this article. The Motley Fool owns shares in Standard Chartered.  

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