Broker tips: Copper miners, Johnson Matthey, Thomson Reuters
Higher copper prices prompted Lehman Brothers to upgrade price targets across the mining sector this morning.
The broker raises its copper price estimates for 2008 to $3.90 a pound from $3.00 previously, and consequently lifts its price targets on Xstrata, BHP Billiton and Rio Tinto respectively to 6,000p from 4,300p, 2,600p from 2,100p and 7,900p from 7,000p.
It maintains its 'overweight' ratings on the three miners.
Lehman also raises its price target on Anglo American to 4,500p from 3,900p and keeps its 'equal-weight' stance on the miner.
It also raises its price target on Vedanta to 2,300p from 2,150p, but keeps its 'underweight' rating on the India-focused company.
Lehman said it expects supply growth of copper to fall short of expectations, but demand to increase.
It also upgraded its copper price forecasts for 2009 and 2010, to $4.50 from $2.75 a pound and to $4.00 from $2.00 respectively.
Johnson Matthey was among the FTSE 100's heaviest fallers today after UBS downgraded the speciality chemicals company to 'sell' from 'neutral' on valuation grounds.
It keeps its 1,870p price target on the company.
While it does not see significant earnings risks for Johnson Matthey, there are concerns in important areas such as car and truck markets, UBS said.
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Johnson Matthey supplies materials such as refined platinum for the automotive industries.
Thomson Reuters was boosted today by a JP Morgan note that went against most broker opinion and gave the newly-formed financial information giant an 'overweight' rating.
It said the market had been too pessimistic on the new FTSE 100 company. ABN Amro and Collins Stewart recently started coverage on Thomson Reuters with 'sell' recommendations, while Morgan Stanley rates it at 'underweight'.
However, JPM said the company was better positioned for an economic downturn than its predecessors had been.
"We think the new entity will weather a financial markets downturn better than Reuters and Thomson Financial did in 2001-03," the broker said.
It continued: "Unlike the companies' individual positions in the 2001/03 downturn, the combination of Reuters and Thomson Financial diversifies revenues geographically, by asset class and customer type."
Development of new revenue streams since the last downturn, such as datafeeds for algorithmic trading, should also improve performance, JPM said.
It said Thomson Reuters' Markets Division (which broadly covers the company's news services) would be a key stock driver. It also sees the Professional Division, which includes professional information services such as Thomson Healthcare and Thomson Legal, as providing strong defensive qualities, adding that it expected this side of the business to account for around 59% of 2008 profits.
JPM initiates Thomson Reuters with a 1,935p price target.
