Market report: Thursday close

By Mickey Clark for MailOnline
Updated: 12:01 EDT, 19 July 2007

Buyers were rushing to snap up shares in South African insurer Old Mutual today as rumours of a huge deal involving Standard Chartered and Old Mutual's majority-owned South African bank Nedbank gripped the market.

One version tipped Standard Chartered, down 13p at 1671p, as poised to launch a full takeover while other traders quoted a story in South Africa's Business Day that had Standard pursuing a large stake.

Nedbank is one of the four largest retail banking groups in South Africa, and Old Mutual's 51% stake would be worth at least £2.2bn. Old Mutual climbed 7.7p to 175.9p but sources close to the company said control of the bank was still very much a core part of the insurer's long-term strategy.

London's FTSE 100 index put on 73.1 points to 6640.2, encouraged by a positive opening on Wall Street, where investors shook off yesterday's gloomy comments from US Federal Reserve boss Ben Bernanke to drive the Dow Jones up 82.0 points to 14,000.20.

There's more than one supermarket out there - investors were piling into Wm Morrison - not just on the back of its reassuring sales growth but also on word that Sainsbury's fan Robert Tchenguiz is now stakebuilding in its smaller rival.

Analysts have long been pointing out that the logic underpinning Tchenguiz's investment in Sainsbury's - namely an undervalued property portfolio - applies equally to Morrisons. The grocer jumped 12¼p to 328p as almost 50m shares changed hands.

However, traders doubted that Tchenguiz would have been waiting until the results were out of the way and suggested it was simply a delayed reaction to the bid situation regarding Sainsbury's, 1½p better at 592p.

Debenhams was also back on the shopping list after Baugur boss Jon Asgeir Johannesson admitted he was sitting on a £600m war chest destined for investment in his existing brands and other UK opportunities. The Icelandic millionaire was talking while investigating a carbon-offsetting scheme in Rwanda in Africa.

The struggling department stores chain climbed 3½p to 138½p as the market digested his comments. Johannesson, whose Baugur group bought a 5% stake in Debenhams last year and already owns Hamleys and House of Fraser as well as stakes in Oasis, Coast and Karen Millen, said Debenhams could be a 'good opportunity - especially as we are playing in the department store world'.

Dairy Crest, up 24½p at 722p, got a positive response to first-quarter trading figures. Although it did not change its expectations for the year, it reported particularly strong world markets for skimmed milk powder and butter while key brands, including Cathedral City, Petits Filous and Utterly Butterly were performing well.

A remarkable change in fortunes for North Sea oil producer Venture Productions. Yesterday, investors were baling out after production estimates were cut in the face of bad weather.

Today they were diving in, lured by the promise of a substantial cash injection from the private-equity world. ArcLight Capital and 3i will invest more than £200m in Venture, up 57p to 815½p, in return for a stake of 9.9% a-piece. Venture will use the money for more North Sea acquisitions, and said it was furthering its buying power by negotiating new debt terms.

Broker UBS repeated its advice to buy and said the deal implicitly values Venture's shares at a 21% premium to the current price,or 918p.

Gas storage and oil and gas producer Star Energy, steady at 245p, could be worth up to 495p a share, says Citigroup, but it now thinks planning hurdles relating to its desired onshore gas application make that a 'blue sky' valuation. It is reducing its target price from 330p to 250p and telling clients to start selling.

TAKING STOCK: Sectors at a glance

BANKING & FINANCE
Barclays Wealth reckons it is worth buying more Icap, despite Michael Spencer's unimaginative trading update that the 'positive outlook for the business remains positive'. With industry growth of between 7% and 9% predicted, and the promise of share buybacks reiterated, Barclays is repeating its outperform rating.

BUILDING & PROPERTY
Property tycoon Robert Tchenguiz could look at buying Malmaison and Hotel du Vin, the boutique hotel chains being auctioned off by Marylebone Warwick Balfour. He can expect competition from Irish property investment firm Quinlan Private and privateequity house Permira. Tchenguiz has a 10% stake in Sainsbury's.

CONSUMER
Although first-quarter figures suggest its strategic initiatives are beginning to pay off, Northern Foods still has nine more months of the year to go and Panmure Gordon reckons there is no reason to change its hold rating. It says the shares are fully priced and with rising raw material prices yet to be passed on, real issues are unresolved.

ENGINEERING
Dresdner Kleinwort is urging clients to buy Vitec despite worries about the weakness of the dollar. While Vitec is calculating a negative currency impact of £3.2m. Dresdner points to gains in broadcast systems and imaging as reasons for a profit upgrade. It predicts a 21% increase in pre-tax profits to £14.2m.

HEALTH
Dose up on vaccine maker Acambis, says UBS ,which has upgraded its rating to buy from neutral due to the US regulator's recommendation that the ACAM 2000 smallpox vaccine be approved. It has trimmed its target to 142p from 158p and notes that another fundraising round remains a risk, but an increasingly low one.

INDUSTRIALS
Woodside Petroleum, 34%-owned by Royal Dutch Shell, has reported a dip in production during the second quarter of 2007 thanks to problems at its Chinguetti project in Africa continuing to cause headaches. Woodside delivered output of 17m barrels of oil equivalent, 6% lower than in the first quarter.

LEISURE
Bottoms up! Wetherspoons' forecastbeating sales mean a profits warning is off the menu, says Evolution Securities. Its target of 750p - some 200p above the current price - reflects an unchallenging price-earnings ratio of just under 11 times profits for 2007 and it says another £20m could be spent buying back shares.

MEDIA
Heavyweight broker Goldman Sachs is looking increasingly fond of directories publisher Yell. It has lifted its target price to 518p from 502p and is enthusiastic about its cashflow as long as the return on investment in advertising is high. However, it is sticking with its neutral rating as the lack of visibility in the US is a drag.

NATURAL RESOURCES
Broker Numis said it is reviewing its target price and current reduce recommendation for Rio Tinto following the miner's latest production figures. While iron ore production hit a quarterly record, copper was down 9%. It is forecasting first-half profits of $3.6bn (£1.8bn), near the bottom of the consensus range.

RETAIL
Sainsbury's is really the only story in town for retail analysts. Most say the Qatari bid is some way off being a done deal. Man Securities' Christopher Gower says: 'I'd be very surprised if Justin King said 'we're going to accept'. If there is a property restructuring, it's going to put significant pressure on the operating business.'

SUPPORT SERVICES
NETeller, which processes payments for online companies and was hammered by the ban on internet gambling in the US, will pay $136m (£66.3m) in a deal to avoid prosecution there. The move comes weeks after NETeller's founders admitted illegal overseas transfers of what prosecutors claimed was billions of dollars.

TECHNOLOGY
Technology services giant IBM has posted a 12% jump in quarterly profit and increased its 2007 earnings forecast as revenue surged after the acquisition of a number of software companies. Net profit was $2.26bn (£1.13bn) while revenue was $23.8bn, up from $21.9bn a year earlier.

TELECOMS
Dutch broker ABN Amro has raised its target for BSkyB to 800p from 680p and repeated its buy recommendation to reflect the potential value of the broadband business and modest operational upgrades. It says its valuation still looks attractive and reckons Sky will extend its competitive advantage into 2008.

TRANSPORT
There is more than 50% upside in the shares of the business class-only transatlantic carrier MaxJet, according to Panmure Gordon. Though the stock is trading below its 138p June float price, the broker says it is worth 200p as latest positive passenger statistics indicate its business model is working.

UTILITIES
The best way to play the water sector is United Utilities, says JPMorgan, following an in-depth review of the sector. It reckons United is undervalued by about 16%, justifying its overweight rating. It remains fundamentally neutral on the sector, claiming the impact of rising interest rates is overstated and overpriced.