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

25 Oct US close: Markets rise, on the back of Microsoft and Procter&Gamble

US stocks registered moderate gains on Friday, despite reports of a first Ebola case in New York, while the focus remained on company results.

24 Oct Fitch affirms Spain and Italy at BBB+, both with stable outlook

24 Oct Three people hospitalised after shooting at Seattle high school

24 Oct Apple iTunes sales plummet

iTunes sales have fallen 13% to 14% world-wide since January 2014, underlining the precarious nature of the music industry’s recovery.

24 Oct GoPro shares slumps as Oppenheimer initiates covearege of the stock at sell

24 Oct S&P upgrades Cyprus on strong budget performance

Rating agency Standard & Poor's has upgraded European economic struggler Cyprus, citing a strong budgetary performance.

24 Oct Market overview: S&P downgrades Tesco

1630:Close The Footsie ended the session lower ahead of this weekend’s ECB stress tests and after an initial feint lower in US stocks. Significantly, on Friday ECB president Mario Draghi sounded a clarion call to action, warning leaders from the European Union that a "joint effort" is required to avoid a "relapse into recession." Tullow continued to reel under the pressure of low oil prices but Pearson did worst on the top flight index after announcing that its CFO was leaving. Intercontinental Hotels Group was also to be seen lower following reports overnight of an Ebola infection in NY. Heading the other way was Shire. The firm updated investors on its third quarter results. Tesco managed to hold on to the nearest level of technical support at 168p – at least for now. FTSE 100 down 30 to 6,388.7.

24 Oct US open: Markets fluctuate amid renewed Ebola fears, while Ford and Amazon drop

US stocks were largely unchanged on Friday, as investors looked to be worried by reports of the first Ebola case in New York, while the focus remained on company results.

24 Oct City's mayor says NYC fully prepared to deal with Ebola

Bill De Blasio, New York City's mayor, said the city was "fully prepared" to deal with the Ebola virus.

24 Oct Europe close: Stocks end on a mixed note

European equities finished the Friday session on a mixed note as investors kept their cards close to their chests ahead of the European Central Bank’s (ECB) ‘stress tests’ which were due out this weekend.

Advertising

HIGHLIGHTS

New York
Ebola latest: The NYPD has been photographed throwing hazmat suits and gloves into public bins

Welcome to our rolling coverage of the Ebola crisis. Refresh for updates on the outbreak as they happen.

VIDEOS

EUR/USD: continues its clearly bearish trend
REGISTER NOW!