Investment Column: Platinum demand downturn dents Lonmin

Share price: Hold

Our view: 833p (-41p)

The end of the markets' love affair with commodities has been hard to bear for Lonmin, the platinum producer that yesterday unveiled a raft of measures to weather the storm engulfing the mining sector. Worth over £43 last July, the stock fell to 1575p the week after Xstrata abandoned its 3300p a share offer in October, and last night the stock closed down 4.7 per cent after the company posted its update.

Chief executive Ian Farmer admits that the business has been performing below its potential, and reckons that the platinum market will only begin to improve in 2010.

In the meantime, he's cutting jobs (the headcount at the London office, for example, will be cut back by a third, with some functions moving to South Africa, where Lonmin does its mining), and is scrapping the complex management structure bequeathed by Brad Mills, his predecessor.

He's reviewing production, cutting capital expenditure and changing the group's approach to mechanisation. Lonmin has also passed on the final dividend, and will not be making payouts "until conditions allow". Gearing stands at 12 per cent, and banking relationships remain sound and secure.

But will it be enough? By all accounts, Mr Farmer appears to be moving on the right track. And while nothing is ever perfect (JP Morgan helpfully points out that the London office need not serve as more than an investor relations base) the new measures are a welcome change. He is dealing with the crisis at hand and positioning the business for more benign times.

That said, the global slowdown is still gathering pace, and Lonmin must brace itself as businesses around the world cut back on their consumption of commodities like platinum. Car makers, the biggest industrial customers in the platinum market, are a case in point. The sector is suffering as consumers defer plans to upgrade to the newest model on the block. The biggest in the business – the likes of GM, Ford and Chrysler – are making record losses and haemorrhaging cash, and the platinum market is unlikely to recover until the sector stabilises.

In a nutshell then, the short-term outlook for platinum producers is problematic, but Mr Farmer's plans for Lonmin inspire hope for the long term. Fasten your seat belts. Hold.

Big Yellow Group

Share price: Hold for now

Our view: 230p (+12.5p)

If there is any truth in the old adage that fortune favours the brave, then those brave enough to buy shares in the storage and real-estate company Big Yellow Group may end up with big smiles on their faces. The group announced an ugly set of interim results yesterday, showing that pre-tax losses were £54.3m, after the group made a £46.8m profit in the same period last year. The figures looked especially bad as the group wrote down £60.6m in the value of its property assets. Executive chairman Nick Vetch is also downbeat, saying that the whole sector will need to tread water for some time.

With that in mind, investors could be forgiven for not really liking the look of Big Yellow Group, especially as it falls into the property sector, which punters are constantly being reminded is one of the worst they can put their money in.

But maybe Big Yellow Group is a good bet for those that like their investments a bit racy. Analysts at Evolution argue that: "For the time being at least, Big Yellow appears to be in much better shape than the rest of the real-estate sector. Few property companies have the confidence or financial strength to pursue development programmes right now. Big Yellow is not looking merely to survive the downturn, but to use it as an investment opportunity."

They go on to say that after previously advising clients to jettison the stock, they should now buy: "The shares are trading at a 55 per cent discount to net asset value, which is based on a conservative valuation yield of 7.8 per cent."

Investors should not be advised to buy the shares of companies that are finding things a bit tough, and for that reason we would stand back for the time being. In a few months, however, Big Yellow is likely to get a big bounce. Hold for now.

Laird

Share price: Sell

Our view: 67p (-36.5p)

Oh dear, oh dear, oh dear. In these times of corporate hardship some companies must hate the regulatory duty ofhaving to update the market on progress, or the lack thereof, especially when it leads to a fall of 35.3 per cent in the share price, sending the stock to a 19-year low.

The electronics group Laird issued such an update yesterday, warning that worsening economic conditions would lead to disappointing revenues and profits in the fourth quarter of this year and that the numbers would be "very significantly below" those recorded last year. The company blamed the slowdown on the economic crisis, adding that there had been "a marked fall-off" in revenues across all its sectors.

Chief executive Peter Hill argues that the group has balance sheet strength and solid market positions: he also warned that, much like other businesses, jobs would be cut, with the details to be outlined in December.

After downgrading earnings per share growth by 18 per cent, analysts at the group's broker, Cazenove, felt compelled to point out that the company is in no worse shape than other groups in the sector, which is probably true. This is not, however, the vote of confidence that investors would be looking for. Sell.