Market report: Friday close

By Mickey Clark for MailOnline
Updated: 12:24 EDT, 12 January 2007

Investors were checking into InterContinentalHotel (ICH) today as rumours of a 1500p takeover offer grew louder.

Some traders suggest a bid is imminent, with Permira or US operator Starwood Capital the main names in the frame. Others point out that these stories have been circulating for months.

But ICH, which owns Holiday Inn as well as Crowne Plaza was one of the best-performing stocks, up 35p at 1226p. This gives the group a stock market value of £4.27bn but a bid at 1500p would imply a value of £5.26bn.

Intercontinental, which was the hotel division of the old Bass group, owns, manages, leases or franchises 3650 hotels in 100 countries around the world.

In general, trading was quiet with profit taking ahead of the weekend. The FTSE 100 closed up 8.9 points at 6239.0. Oil majors led the Footsie fallers, with BP up 9½p at 546½p, Shell 2p lower at 1712p and Cairn Energy 22½p off at 1663p.

Drax rose 21½p to 73½p after strong tips from brokers at ABN Amro and Morgan Stanley.

ABN Amro upgraded the Yorkshire-based company to hold from sell although it cuts its output and achieved price assumptions. Morgan Stanley said it reckons Drax has a more advantageous contracting position for 2006-08 as well as a more attractive dividend policy than the other UK power generators.

Despite bullish statements from Barratt and Bellway, the housing sector continued to suffer in the wake of yesterday's shock interest rate rise. Barratt was down 4p at 1200p while Bellway was 14p lower at 1502p. The potentially damaging effect on consumer sentiment outweighed today's good news.

Traders also kept a close eye on Crest Nicholson, down 1½p at 612p. Today is put-up-or-shut-up day for HBOS and Sir Tom Hunter. Since the housebuilder rejected their takeover offer of 585p in November, Crest Nicholson has consistently traded above 610p, with the City expecting more money from Sir Tom or a rival.

Meanwhile, serial entrepreneur Nigel Wray has been building up his stake in south-east builder Oakdene Homes. Wray snapped up just over fivem shares or 6% of the company, taking his total holding to 16% and making him the biggest shareholder.

The housebuilder, worth £67m. has looked like a tasty takeover target for a while. Oakdene has a waterfront development at Newhaven in Sussex and another at Swaylands in Kent, but trades at just eight times earnings.

Commercial finance house Hitachi Capital UK saw more than 20½p wiped from its stock market value as it prepared to write off £4m as a result of the collapse of trailer rental group Transent.

Transent has been a longstanding client of the Business Finance group and the board said the sum would ensure adequate provisions remained for the rest of the group. However, the shock provision countered any positive sentiment emanating from 'encouraging third quarter results', also revealed today.

Back to housing, Aim-listed City Lofts group, which jumped aboard the bandwagon by converting warehouses and unloved office buildings into trendy apartments in cities such as Leeds and Manchester, is selling out for a 122.5p a share, valuing the company at £61.6m. City Lofts, 10p up at 119½p, reported a loss of £3.235m.

Fun Technologies, which specialises in mobile and internet gaming and recently launched online scrabble saw its shares slump by more than 20%, falling 28p to 84p, after it warned that it may need extra funding.

Troublingly, it said that while it is seeking new acquisitions, it is the company's current working capital position that may force it to raise new funds.

Although sales are in line with expectations, and the response to Scrabble Cubes has been good, margins have fallen compared with last year.

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The market at a glance...

BANKING AND FINANCE

Northern Rock, Alliance & Leicester and HBOS were three of the biggest losers in the banking sector yesterday following the latest interest rates rise. Brokers say their heavy exposure to the mortgage market makes them vulnerable. City bonuses continue to fuel the house-price boom and further rate rises are likely.

BUILDING AND PROPERTY

Housebuilder Taylor Woodrow has hired a new head of its US operations, which accounts for roughly half of its business, but where margins are under pressure because of the recent downturn. Texan John Landrum joins on 5 February from local housebuilder the Related Group, where he was chief operating officer.

CONSUMER

The cold snap in November helped Greggs, Britain's largest bakery chain, bounce back from a slow start to second-half trading. By December Greggs was selling onem mince pies a week, helping sales from its stores open a year or more climb 3.3% in the last three weeks of its second half, which ended on 30 December.

ENGINEERING

Merrill Lynch has repeated its buy rating on Rolls-Royce and raised its target from 530p to 565p to bring it into line with the ratings of rival companies. The current growth in wide-bodied aircraft is good news for the aeroengine maker, which has a 32% share of that market compared with just 8% for narrow-bodied craft.

PHARMACEUTICALS

Sales of Shire Pharmaceuticals' Elaprase treatment for Hunter's Syndrome should reach £103m by the end of the decade, doubling to more than £200m by 2015. Collins Stewart describes Elaprase as a 'protected market' which could tempt bigger rivals to bid for Shire. The broker continues to rate Shire a buy and has raised its target from 1126p to 1200p.

INDUSTRIALS

Plumbing supplies giant Wolseley splashed out £66m on four acquisitions yesterday. Broker Citigroup says it is an everyday affair for a company valued at £8.4bn and that Wolseley continues to growboth organically and by acquisition. It continues to rate the shares a buy with a 1500p price target.

LEISURE

Brewer Greene King enjoyed a strong finish to 2006, which has prompted Deutsche Bank to downgrade from buy to hold. The bank remains positive about prospects in the long-term and expects 2007 to be another record year. Greene King will continue to grow organically, giving it scope for further acquisitions.

MEDIA

ABN Amro has downgraded Informa from buy to add, but has raised its target from 537p to 632p. Shares in the publisher and conference organiser have risen almost 35% over the past year and the earnings growth momentum is expected to continue. Bids from Springer Science and Business Media are not ruled out.

MINING

Cluff Gold is sitting on high-grade gold at its Baomahun project in Sierra Leone, where the 2007 drilling programme is under way. The first assay results from three completed core holes confirmed the strike in the western zone. Reserves at Baomahun are currently estimated at 880,000 ounces but this may prove to be conservative.

RETAIL

Selling clothes to the older woman has proved a sure winner on the High Street for Jacques Vert, which also owns the Windsmoor, Planet and Precis brands. Like-for-like sales rose 8% in first 10 weeks of its second half to 28 October, up from a 7.8% increase in first-half sales from stores open a year or more.

SUPPORT SERVICES

VT Group has parted company with its finance director of six months Chris Rickard. Insiders at the Vosper Thornycroft shipbuilder-turned-armed services, education and communications outsourcing group said the appointment had not worked out after Rickard joined last year from engineering group Weir.

TECHNOLOGY

Supplying the world's broadcasters with the latest high-definition camera kit for big sporting events is lining the coffers of Vitec Group, the camera and lighting equipment supplier. It told brokers today its board was expecting results for the year to end-December to be 'at the upper end of expectations'. Revenues will come in at about £220m, 13% up.

TELECOMS

Lehman Brothers has upgraded Vodafone from equalweight to overweight in the belief it will benefit from cost-cutting initiatives and growth in mobile phone replacements. The broker reckons the potential acquisition of India's Hutchison Essar at £10.2bn would add 1% to earnings per share within three years.

TRANSPORT

Citigroup remains a seller of Stagecoach but has raised its target from 107p to 140p to reflect the sector average rating of 16 times earnings and the benefits of its 49% stake in the Virgin West Coast franchise. But the broker has little appetite for the bus and train operators and does not see much scope for improvement.

UTILITIES

Draxmoved off recent lows after Goldman Sachs raised the shares from sell to neutral, telling clients it has moved to a shorter-term target price of just three months of 764p, which is based on forward oil prices. Recent evidence shows the shares being heavily influenced by oil price moves in the short term.