Investment Column: Lonmin looks cheap but needs to do more


Lonmin

Our view: Hold

Share price: 1782p (+97p)

Lonmin, the precious metals miner, presents investors with something of a dilemma. The group issued a decent set of first-half results yesterday, saying that it had moved back into profit, and sending the shares up by nearly 6 per cent. That's the good news. The not-so-good news is that Lonmin's stock has been left standing in the wake of other mining groups, which have benefited from surges in bulk commodity prices. Indeed, compared to some of its peers, Lonmin is looking decidedly laggard-like, with a rise of a little more than 13 per cent in the last 12 months. And the lack of a dividend does not provide any solace. But because the shares have not enjoyed such a bountiful time of late, Lonmin's stock is now looking attractive, trading on a 2011 price forecast multiple of 16.1 times.

There are other things to note. As well as reporting a profit yesterday, the group said that it is set to issue 9.6m new shares – about 5 per cent of the current issued share capital – to fund operations in South Africa under the country's black empowerment legislation.

On the dividend, the chief executive, Ian Farmer, said that while there was no interim payment, the company is "minded" to pay out at the end of the year. The speculative punter may also be tempted to have a bet on Lonmin given rival Xstrata's 24.6 per cent stake. Xstrata failed in a bid for Lonmin a little more than a year ago, but has benefited from the increase in commodity prices. It was also rebuffed in an approach for Anglo American last year, and is still sniffing around for deals. All that said, we still want more from Lonmin. The shares lag others in the sector, and while we see the improvement, it would take a return of the dividend before we buy, even though the shares are worth holding.



Braemar Shipping Services

Our view: buy

Share price: 426p (+4p)

After our last look at Braemar Shipping Services, events have turned out very much as planned. And in the six months following our "buy" recommendation, the share price has gained a healthy 9 per cent. Yesterday's full-year numbers might suggest a change of tack. Pre-tax profits came in at £15m, some way down on the previous year's £17.3m, pushing earnings per share from continuing operations down from 56.7p to 47.93p. The group's cash has also taken a hit, running at £15.3m rather than £21m in financial 2009. But there is still good reason to buy. In the short term, the good news is a final dividend up 5 per cent to 16.25p per share. There are also encouraging longer-term signs. Profits might be lower, but Braemar's numbers are still the third highest in the company's history, lagging only the boom years of 2007 and 2008. And demand in shipping is clearly recovering, after the decimation of the credit crunch and worldwide recession.

Braemar's chairman, Sir Graham Hearne, says he is positive about the company's prospects for the year ahead. We take a similar view of the group's shares. The stock is currently trading on a multiple of 7.7 times next year's forecast earnings, with a dividend yield of 6 per cent, according to Gerald Khoo at Arbuthnot, making it "attractive in absolute terms and relative to its main peer, Clarkson". There is some way to go before Braemar runs out of steam. Buy.



Interserve

Our view: buy

Share price: 223.38p (+14.25p)

Interserve continues to please. The services, maintenance and building group yesterday said that its business is performing well, though, as flagged up at the time of the annual results, the support services and equipment services businesses continues to face challenges, "such that the second half weighting of profits will be more pronounced than usual". This no surprise, and as Panmure Gordon points out, should already be in the price. Now, as we've said before, investors in this sector must take note of the spectre of sharp cuts in public-sector spending. But as we've also noted in the past, Interserve isn't a one-trick pony. It offers non-UK exposure with its associate businesses in the Middle East, something which affords useful visibility in terms of future revenues.

Though a major selling point, what really seals the case for Interserve – and sealed it for us the last time the company was on our radar – is its valuation. The stock trades on a shockingly thin multiple of 5.3 times Panmure's estimates for the full year. Why? To be frank, we have no idea, particularly as Interserve offers a yield of well over 8 per cent. The credit crisis revealed that markets, though often ahead of events, don't always know everything. We continue to believe that Interserve is being unfairly overlooked. Keep buying.

Start your day with The Independent, sign up for daily news emails
News
peopleJonathan Ross has got a left-field suggestion to replace Clarkson
Sport
Lewis Hamilton secured his second straight pole of the season
f1Vettel beats Rosberg into third after thunderstorm delays qualifying
Arts and Entertainment
The teaser trailer has provoked more questions than answers
filmBut what is Bond's 'secret' that Moneypenny is talking about?
News
Johnny Depp is perhaps best known for his role as Jack Sparrow in Pirates of the Caribbean
peopleBut how did he break it?
Sport
football This was Kane’s night, even if he played just a small part of it
Travel
travel Dreamland Margate, Britain’s oldest amusement park, is set to reopen
News
news
News
Founders James Brown and Tim Southwell with a mock-up of the first ever ‘Loaded’ magazine in 1994
media
News
Threlfall says: 'I am a guardian of the reality keys. I think I drive directors nuts'
people
Voices
voices The group has just unveiled a billion dollar plan to help nurse the British countryside back to health
News
The Westgate, a gay pub in the centre of Gloucester which played host to drag queens, has closed
news
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss