The Investment Column: Hold on to Standard Chartered for its long-term Eastern promise

Victory is cheap enough to hold - Alliance UniChem has ample room for growth

The fastest-growing econ-omies of Asia have become a battleground where the major Western banks jostle for position. And as its main markets in Hong Kong and Singapore are still languishing, Standard Chartered, the Asia-focused bank, is doing the right thing by trying to make its mark elsewhere in the region.

The fastest-growing econ-omies of Asia have become a battleground where the major Western banks jostle for position. And as its main markets in Hong Kong and Singapore are still languishing, Standard Chartered, the Asia-focused bank, is doing the right thing by trying to make its mark elsewhere in the region.

The group has stepped up the pace of acquisitions and recently became the first foreign lender to buy into a Vietnamese bank. In January, it managed to trump its bigger British rival HSBC by clinching a $3.3bn deal to buy Korea First Bank after a fierce takeover battle. While the price looked high, Standard Chartered badly needed the KFB acquisition to gain a foothold in northern Asia, after being outbid by Citigroup for South Korea's KorAm Bank last year.

Such is the struggle to gain scale across the emerging markets, especially in China, which has to open up its finance industry to gain membership of the World Trade Organisation.

In India, Standard Chartered is the largest international bank, with 75 branches. In China, where it has bought a 20 per cent stake in Bohai Bank, it is looking for further acquisitions. In Africa, it is now struggling to keep up with Barclays, which has bought South Africa's biggest consumer bank Absa. By contrast, Standard Chartered only owns the much smaller credit card internet bank 2020 in South Africa.

Standard Chartered is based in London but, with two-thirds of profits in Asia, it is sheltered from the increase in consumer bad debts which several major UK banks have warned about in recent weeks.

Yesterday's trading update showed that Standard Chartered had made good progress so far this year, despite the soft spots in its two biggest markets. Most of the bank's consumer banking businesses have seen double-digit income growth. The competitive Hong Kong market, which provides a quarter of group profits, shows signs of recovery.

Its emerging markets focus makes Standard Chartered an attractive takeover target. Two months ago there was speculation that Barclays would buy the Khoo family's 13 per cent stake to make a move on Standard Chartered. Citigroup and Royal Bank of Scotland, have also been touted as possible buyers, though RBS ruled itself out in April. The shares offer good long-term value. Hold.

Victory is cheap enough to hold

Victory Corporation, the cosmetics business controlled by Richard Branson's Virgin group, warned yesterday that the imminent closure of a VAT loophole will knock £4m off annual profits. It is news to make investors' mascara run.

Because Victory has not recently made £4m. The annual results it also announced yesterday showed pre-tax profit dipping to £1.2m in the year to March, from £2.1m the year before.

Victory sells cosmetics through a national network of agents, who organise testing parties, in much the same manner as Tuppaware is sold. The great hope for pulling Victory out of the VAT mire is its decision to branch into jewellery. The lines that it has chosen have proved popular and we can expect significant sales growth in the coming year as a result.

Seymour Pierce, the company's broker, expects that this will be enough to lift profits to £3m this financial year, and £5.5m the year after. With products now being bought more cheaply in the Far East, Victory has a fighting chance of making those numbers, but it remains vulnerable to swings in consumer confidence. A dip in sales in the months before Christmas meant yesterday's figures were a very long way short of the level that investors were initially hoping for.

Given the embarrassment that this company is to Virgin, there is always the chance it will be taken private, and the shares look cheap enough to hold.

Alliance UniChem has ample room for growth

Alliance UniChem has found the growth hormones in among its vast warehouses of drugs. The company distributes medicines to pharmacies throughout Europe, and has more recently been growing its own chains of chemists, including in the UK, where it owns Moss. And just look at its share price shoot up.

We have tipped this stock three times in the past three years, but we're not tempted to take our substantial profits yet. As the company put it in another bullish update yesterday. It said: "The strength and diversity of the group means that, despite some relatively difficult wholesale markets in the year to date, we are confident of delivering a strong financial performance for the year as a whole."

For every challenge there is a bigger opportunity. In the UK, a one-off cut to drug prices means the wholesale business is taking a smaller cut on the medicines its supplies. But the Government is keen to encourage chemists to take on more simple health work to ease congestion in the doctor's surgery. Drug prices are under pressure across Europe, but the wholesale and retail markets are being progressively liberalised. Manufacturers are trying to cut out the middleman and supply pharmacists direct in some countries, including France, but Alliance UniChem still has ample opportunities for consolidation in retail (witness an acquisition of 50 chemist shops in Ireland recently) and for geographical expansion on the Continent. The shares are valued on 16 times earnings, decent value still.