Yell screams out as a buy

By Geoff Foster for MailOnline
Updated: 03:03 EDT, 20 October 2006

Investors let their buying orders do the talking as they chased Yell higher. Shares of the Yellow Pages business screamed 17½p higher to a year's peak of 618½p after Verizon Communication announced plans to spin off its US yellow pages directories operation into a new public company, Idearc.

With analysts predicting the business could be worth between £7bn and £9bn, it makes Yell, valued at around £4.8bn, look significantly undervalued. A re-rating could be on the cards.

Yellow Book, Yell's American subsidiary, is the largest independent yellow pages group in the US. It publishes 835 directories with a total circulation of 107m in 46 states, plus the District of Columbia.

Yell's half-year results will be announced early next month and number-crunchers will be paying even more attention to its performance in the US so they can get a better idea of exactly how much it is worth.

Dealers also continued to give the thumbs up to Helen Stevenson's appointment as chief marketing officer. She joins on November 1 from LloydsTSB.

A resilient Footsie retrieved a 37-point fall to stand 33 higher as Wall Street breached 12,000 again. But profit taking in London left the close up only 5.6 points at 6,156.

Better-than-expected third quarter figures from five Dow constituents - Citigroup, Coca Cola, Honeywell, McDonalds and Pfizer - increased the likelihood of doubledigit earnings growth continuing into the fourth-quarter.

Prevailing hopes of a bid from HSBC (12p easier at 1001½p) helped the Prudential shrug off the dire trading performance of its online bank Egg to close 16p up at 645½p on hefty turnover of £55m. But news that Egg will incur a loss of £40m in the second half because of an increase in bad debts, unsettled the rest of the banking sector. Royal Bank of Scotland shed 15p to 1868p, Northern Rock 11p to 1191p and HBOS 12p to 1077p.

Although former BBC director general Greg Dyke has ruled himself out of any further predatory interest in the struggling broadcaster, ITV rose 2¾p to 104¾p. Punters continued to switch on to talk of a fresh private equity offer.

ITV earlier this year rejected a £5.4bn offer from a consortium led by Goldman Sachs and spearheaded by Dyke. Mining stocks moved north with rumours of a merger between Anglo American (49p up at 2431p) and Rio Tinto (35p up at 2795p) again doing the rounds.

Hopes of a settlement soon with its unions over its burgeoning pension deficit lifted British Airways 7p to 452½p.

Lloyd's List publisher Informa was the day's best performer in the FTSE 250, soaring 71¼p to 570p in response to a £ 2.3bnplus bid approach from Candover and Cinven, the venture capitalists that own rival Springer Science and Business Media. Emap gained 18p to 812p in sympathy.

Still considered to be a takeover target of Shell, Premier Oil gushed 28p to £12. Northern Petroleum spurted 10½p to 124p on talk of an imminent report on its joint - Shell and ExxonMobil - venture gas interests in Holland.

West End property specialist Great Portland Estates, in which Garville this week reduced its stake to below 3% from 25.4% by selling stock at 560p, rallied 8p to 579p. It has acquired properties at 20 Hanover Square and 65/71 New Bond Street, on a site that is blighted by plans for the Crossrail rail link. Thomson Intermedia, the marketing services group, soared 27½p to 255p after signing a partnership agreement with GroupM, owned by WPP.

Shareholders of automated telephony speech group Telephonetics were left speechless as the shares crashed 6p to 15p on a warning that profits for the second half will be materially below expectations.

Educational games software platform group Bright Things improved ¾p to 11¼p after a placing of 10m shares at 11p to raise £1.1m. Chief executive Dominic Wheatley is putting his money where his mouth is by subscribing for 909,090 shares in the placing, lifting his stake to 5.7m shares, or 18.7%.

Powerfilm jumped 13p to 168p after entering into a strategic partnership with Corus Group to develop, manufacture and distribute solar roofing products for the building industry. Following its £12m purchase of DBI Group, which offers specialist cleaning services to the oil, petrochemical and other industries, energy support services group Cape gained 7½p at 201½p.

Renesola added 5½p at 227p after broker Ambrian advised clients to buy, saying it is an exciting and high growth solar company.

• Rumours suggest a trading statement due today from Sopheon will confirm that the maker of product development software is firing on all cylinders. Benefiting from its close association with US giant Microsoft, it has apparently gained around nine new licence orders in recent months. Sales are now in excess of £5m. Down from a year's high of 25¼p, the shares closed unchanged at 18¼p.