Broker tips: Lonmin, Home Retail, Metminco

B.C. | ShareCast | 10 Jun, 2011 12:23 - Updated: 12:26 | | |

Trading screen

UBS has initiated coverage on Lonmin with a ‘sell’ rating and 1,500p target price, highlighting its concerns over the current cost environment.

“Lonmin is one of the highest-cost producers in the platinum industry, and is significantly exposed to the major cost pressures of wage inflation, electricity prices and the South African rand,” the broker said.

UBS highlights sector mining peer Xstrata, which holds a 24.9% stake in Lonmin following a failed takeover bid in August 2008. “While M&A may prove a long-term catalyst for Lonmin, we do not believe Xstrata, or indeed any other firm, will make a bid for it in the next 12 months.”

Nomura has pulled back its target price for Home Retail Group by 20p, on the back of margin pressures and concerns at its Argos chain.

The Argos and Homebase owner reported a “disappointing” first quarter, according to the Japanese broker, in which like-for-like (LFL) sales declined sharply (by 9.6%) and gross margins fell by 75 basis points. These were driven by a poor TV and video gaming sales, which were down over 20%.

“We see ongoing negativity in consumer electronics, while our concerns around product positioning and demographics at Argos remain,” Nomura said. A ‘reduce’ rating is kept, while the target price is reduced from 180p to 160p.

Metminco’s shares have dropped by 20% over the past week on concerns over a potential windfall tax on mining profits in Peru, but Singer Capital Markets believes that fears are unreasonable and keeps its ‘buy’ rating.

“The Peruvian election result spooked mining investors as perceived left wing candidate Ollanta Humala won a 5 year Presidential term. His proposal for a windfall tax on mining profits was the main fear and on Monday morning investors chose the ‘sell now ask questions later’ approach,” said analyst Charlie Long.

However, Long thinks that given the strength of the mining industry in Peru – combined with Humala’s modest representation in congress – high taxes are an unlikely outcome. A target price of 33p is kept.

---

BC

More news

19 Dec US close: Markets ascend as post-Fed boom continues and crude futures rise

US stocks advanced on Friday in a continuation of the week’s post-Fed boost after a day of little economic data.

19 Dec Obama slams North Korea cyber-attack, claims the US will respond

US President Barack Obama has promised there will be a formal response from North America following North Korea’s apparent cyber-offensive targeting Sony Pictures.

19 Dec Friday tips round-up: Diageo, Catlin Group

Consumer goods giant Diageo is seeing a slowdown in growth in one of its main markets, the United States. One would have thought the economic recovery and drop in the oil price would have translated into greater discretionary spending on the liquors and spirits which it purveys. Yet that has not been the case, the company´s boss, Larry Scwhartz, admitted. That is much the same as recent comments out from several of its peers. Increased discounting among top brands, in response to more price-conscious consumers, has been one factor

19 Dec Apple hits back at reports that it endorses child workers and unfair hours

Technology juggernaut Apple is “deeply offended” by new reports claiming workers in its supply chain are treated unfairly.

19 Dec Sir Ian Wood responds to North Sea oil slump with optimism

Despite reports that the North Sea oil industry in Scotland is about to lose 15,000 jobs and production could plummet 10% while the oil price drop culls drilling, the region is not “close to collapse” according to Sir Ian Wood.

19 Dec British women should be allowed to take on close-combat roles, says defence secretary

By 2016 women may hold front line combat roles if the motion gets passed by the Ministry of Defence, according to reports.

19 Dec Results Round-up

People have been buying more carpets as the British housing market recovered, helping floor covering retailer United Carpets to roll out higher profits.

19 Dec London close: Stable oil prices and upbeat retail news buoys Santa rally

The Santa rally continued on its merry way on Friday as oil prices rose and upbeat retail data boosted supermarkets.

19 Dec Europe close: Stocks little changed after mixed data, oil price rebound

European stocks were little changed after mixed reports on German and UK consumer confidence and a rebound in oil prices.

19 Dec US open: Markets trading up as crude futures soar

US stocks were trading in the green Friday, still boosted by the post-Fed rally after a quiet day for economic data.