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UBS joins 'hold' crowd: Analyst cites shrinking market and fewer cost cuts
Jump to full article: National Post (ca), 2002-05-28
Author: Ian Karleff / Financial Post
Intro: Investing in recession-safe bad habit stocks has paid handsomely over the past two years, but Rothmans Inc.'s glow is starting to fade as analysts suggest the glory days are over for the seller of one-fifth of Canadian cigarettes.
Toronto-based cancer-stick maker Rothmans has seen its stock rise 164% since March, 2000, and over the past 12 months has left investors breathless with a 48% gain -- compared to a 6% slump in the Toronto Stock Exchange 300 composite index.
But the party is coming to an end, as the company grapples with fewer smokers, less room to cut costs, and sketchy growth prospects, Peter Rozenberg, a UBS Warburg analyst, said in a report yesterday. He downgraded the stock to a "hold" from a "buy" and dropped his estimate for fiscal 2003 profit by 6% to $2.65 a share.
The UBS move follows downgrades to "hold" by TD Newcrest in April, and by First Associates Investments in December. That leaves Merrill Lynch as one of the few bulls left.
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