Kazakhmys, the east Asian copper miner, embodies the success achieved by London as a financial centre. It was a coup for London to land such a sizeable fish — its £5 billion market capitalisation confers FTSE 100 status on the company with ease. It has provided London investors with a direct line into rises in the price of copper, as the chart here shows, and it has also provided a useful way to gain exposure to supercharged growth rates that can come in emerging market equities.

Yet Kazakhmys has also come to epitomise the risks that investors must stomach when approaching some of the newer London-listed companies. Three dangers spring to mind: First, Kazakhmys cannot give investors the comfort of a long track record. Second, there

are corporate governance concerns and Kazakhmys’s operating standards will make some investors wonder whether it is right to support the company. There were 32 deaths in its mines last year. Not only is that 32 too many, it is poor by mining standards set but other companies.

The third risk is that the profit and share price success of the company depends, in large part, on the price of copper. Burgeoning demand

BACKGROUND

• Former Kazakhmys boss gets £250m

• Higher costs hit Kazakhmys

• Kazakhmys's departing chief sells shares for nearly £500m

• Kazakhmys hit by resignation

Kazakhmys is not for the faint-hearted

Far from being the ideal widows and orphans stock, it is developing in ways that calm the nerves.

Related Internet Links

• Kazakhmys company information

• Kazakhmys share price chart

• Kazakhmys forecast

in India and China has pushed the price up in leaps and bounds. But there are questions, voiced by Kazakhmys itself among others, in yesterday’s full-year results, as to whether demand will continue to grow. The raised copper price is also fuelling increased investment in new copper mines, and increased supply may well lead copper prices down. If it does, Kazakhmys shares may well weaken.

That said, Kazakhmys is getting less worrying as an investment prospect. Time is lengthening its track record and its board structure has become more conventional with recent changes. The transparency with which the company owns up to its too-high fatalities count also suggests it recognises the problem and the need to reduce these human costs.

The company clearly recognises that its dependence on copper creates danger too since it is seeking to reduce that risk through the purchase of a stake in Eurasian Natural Resources Corporation. ENRC drills for oil, mines iron ore and coal, and makes chrome.

It is intriguing to wonder whether UK investors will be keen to support the diversification strategy. (Shareholders in Lonmin, the platinum miner, were unhappy when the board suggested it might buy other assets.) The method of purchase is a little unconventional too: Vladimir Kim, the executive chairman, has bought the 20 per cent stake on his own account and given Kazakhmys the option to buy it when it has undertaken due diligence.

Kazakhmys is far from being the ideal widows and orphans stock. It is developing in ways that calm the nerves, however. Hold.

Cobham

Cobham, the defence and aerospace electronics company, only completed a strategic review of its businesses last autumn but the benefits from refocusing are already beginning to show.

Total revenue during 2006 was down slightly to £1.1 billion as a result of disposals but underlying profits were up 9.5 per cent, the dividend was raised 10 per cent and profit margins widened from 16 to 18 per cent. Better even than that, Cobham is well placed to improve on these gains, with both defence and commercial aerospace markets enjoying boom times.

It won a record £1.4 billion of orders last year and, having paid down its debts, has about half that to fund acquisitions. It seems that Cobham would like to buy in the US but with defence companies riding high on Iraq spending it may be easier for the company to talk about acquisitions than to complete them. Targets are keenly chased, US buyers may have an advantage and there is a risk Cobham will overpay.

If expanison through acquisition proves too difficult, Cobham may find itself chased. It could do a deal modelled on Smiths’ recent deal with GE. Takeover speculation is hardly dampened by thoughts that Francisco Rubiralta Vilaseca, a Spanish industrialist, has recently taken a 5 per cent stake. Buy.

Premier Farnell

Premier Farnell’s customers may include highly skilled engineers who use technology to create innovative products for a living, but, when it comes to buying the electronic components they use to create new products, they have tended to reach for the phone.

That is a practice the components distribution group is keen to stamp out. The roll-out of an internet-based order service, backed up by strong stock levels and the promise of rapid delivery, has helped it to make good progess in recent months. Yesterday saw reports of a fifth consecutive quarter of growth, a year after the group drafted in new management.

North America remains its core market, exposing the group to dollar exchange-rate fluctuations and a possible economic downturn there. However, the company has scored in the region with its new internet sales platform.

It has a strong business in the UK and mainland Europe and has ambitious plans to dominate China’s components market, launching a nationwide service with three operational bases spread around the Middle Kingdom. Premier shares offer a generous 5 per cent dividend yield, and, although it is covered only 1.3 times by earnings, the income appears safe for at least the next three years. Assume earnings growth will come to build cover and drive the share price forward from here. Buy.

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