Broker tips: Lonmin, Home Retail, Metminco

10th Jun 2011 12:22

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