LONDON (ShareCast) - JP Morgan has initiated coverage on Old Mutual with an ‘overweight’ recommendation and a 114p target price saying the insurer offers investors a cheap, geared entry into the market.

JPM said that while market falls have contributed to an estimated 29% decline in Old Mutual’s embedded value (EV), the share price fell by 45% over this period “opening up deep value in our opinion, and large discounts to peers.”

The broker observed that Old Mutual, which is a wealth management group with life insurance and asset management businesses in Europe, South Africa and the US, enjoys strong client inflows.

“We believe it is poised to benefit from any potential recovery in equity markets, the key driver of its earnings,” it said.

“It has been sold down on the back of disappointing results and concerns about its US life business. We see Old Mutual as a cheap entry into a depressed market.”

JPM also pointed to Old Mutual’s ‘very attractive’ dividend yield of 7.7% and said that the current dividend is sustainable with strong dividend growth possible from 2009.

However, JPM also said Old Mutual faced the possibility of a disappointing 2008.

“The impact on EV of weak markets and higher yields could be more severe than expected,” it said, adding that further rand exchange rate and emerging market weakness were additional risks to UK investors.

Elsewhere, Morgan Stanley maintained its ‘overweight’ stance on Old Mutual, but cut its target price to 114p from 166p.

Investec has upgraded its recommendation on the platinum miner Lonmin to ‘buy’ from ‘hold’ pointing to strong prices for the precious metal.

The South African broker noted that Lonmin’s share price has fallen sharply recently, despite platinum prices remaining firm, with investors worrying about reduced demand for the metal due to weaker car sales in the US.

Platinum is used in catalytic converters.

Investec said the correction in Lonmin’s share price is now overdone.

It also kept its ‘buy’ rating and 1,000p price target on Aquarius Platinum.

Credit Suisse has slashed its price target on Yell Group to 55p from 140p, saying it remains negative on European directories as they become by-passed in the move to online.

The broker, which keeps its ‘neutral’ rating on the Yellow Pages owner, said Yell’s first quarter results due on July 24 are unlikely to offer much cheer.

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