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Article / 27 November 2012 at 10:23 GMT

Analysts' Upgrades: Homeserve and Lonmin rewarded decent upgrades

Partner - Senior Portfolio Manager / PP Capital Asset Management
Denmark

Analyst Upgrades and Downgrades

No 'big namers' were upgraded last week. However, European stocks saw more upgrades than US stocks this time, with UK stocks Homeserve PLC (LON:HSV) and Lonmin (LON:LMI) at the top of the list with 11.3 percent and 6.8 percent upgrades respectively

Homeserve PLC (LON:HSV), a provider of home emergency insured repair solutions for plumbing, electrical and gas services posted its half year report last week with an 8 percent increase in sales and a 9 percent better earnings before interest and taxes (EBIT) than the previous year.

Homeserve’s UK business has been under significant pressure since May this year, when Financial Services Authorities started investigating the company’s alleged mis-selling. The company’s sales force has been suspected of using questionable sales techniques and as a result Homeserve closed down its call centre earlier this year. Despite the stock price being down 16 percent year-to-date (YTD), it is approaching the pre-FSA investigation levels in May.

With a fine from the FSA looming over the company and a hurting UK brand, Homeserve is increasingly focusing on its international operations. With customer numbers at close to 20 percent in the US and 42 percent in Spain the company hopes new utility partnerships within both the US and Italy will offset further client deterioration in the UK in 2013.

Homeserve PLC

Lonmin PLC (LON:LMI), the world’s third-largest platinum producer has been the topic of several headlines this year as its miners in South Africa protested heavily, leading the firm to halting its mining operations in its Marikana mine. The unrest in Lonmin’s mines throughout South Africa has also left several other miners in trouble.

As miner’s strikes in South Africa have come to an end, Nomura took the opportunity and raised its ratings of several platinum stocks last week, with Lonmin being one of them. The others were Anglo American Platinum, Impala Platinum and Aquarius Platinum.

Not only has Lonmin been fighting strikes in its mines, its finances have been problematic too as debt covenants have been close to being breached. The company’s struggle of refinancing was however sorted out last week after shareholders accepted a USD 871 m rights issue.

One of Lonmin’s largest shareholders, Xstrata with approximately 20 percent ownership, supported the rights issue but demanded board and management changes be made.

The company has seen its target price downgraded several times in the past (Post-1, Post-2, Post-3). However with the positive development in Lonmin’s story, as well as strengthening platinum prices, analysts have now upgraded their target on the stock by 6.8 percent on average. 

Lonmin PLC - Rating Development

 Other stocks upgraded for the past week are highlighted in table 1.

Analysts Upgrades

For additional details about these stocks, take a look at Saxo Bank’s Equity Research offering here.  

You can read about the week's upgrades in my colleague Matt Bolduc's article: Analyst Downgrades: BBY and HPQ furiously downgraded again

I write about the previous week's analyst upgrades and downgrades every week on TradingFloor.com. If you'd like to be notified with an email whenever a new story is posted, become a member of TradingFloor.com - it's free, and you can sign in with Facebook, Twitter, LinkedIn or Google - and follow the tag "Broker Rating Changes."  You can also bookmark our upgrades/downgrades page.

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