Yesterday's trading: Golden oldie's return to top

By Geoff Foster for MailOnline
Updated: 03:17 EDT, 22 September 2009

Vera Lynn. The Beatles. A postal strike and rising unemployment. It's the age of the comeback.

Looking back: Investors could not be blamed for taking profits yesterday.

Whitbread checked back into the Footsie yesterday after an enforced absence but found the going tough. Shares of the Premier Inn to Costa Coffee and Beefeater group drifted lower with the general trend to finish 13p cheaper at 1248p. Goldman Sachs didn't help by removing the group from its Conviction Buy list.

Rival US broker Morgan Stanley, on the other hand, reckons Whitbread is the cheapest stock in the hotel sector and has lifted its price target by a hefty 40% to 1540p. It expects some positive surprises on the trading front from Costa Coffee and believes Costa to be an unappreciated jewel with solid property backing and a strong balance sheet.

Adding to that, Morgan says Premier Inn is the market leader in the attractive and under-penetrated budget segment, and has above average margins and significant growth potential.

Premier Inn has benefited from a big increase in demand for low-cost travel and accommodation. It recently announced plans to launch the UK's first budget airport hotels at London's Gatwick, Heathrow and Stansted, with a combined 1,570 bedrooms.

Following six consecutive blue-sky days, the Footsie was tripped up by sporadic bouts of profit-taking. It closed 38.53 points lower at 5,134.36, while the FTSE 250 shed 86.28 points to 9,220.65. You can't blame fund managers for taking some cash off the table following the recent spectacular run.

Caution is the name of the game ahead of tomorrow's Federal Reserve meeting at which US interest rates should be left alone at 0.25%. Dealers are a tad fearful that Uncle Ben Bernanke and his merry men could soon start laying the foundations for possible future rate hikes.

Wall Street initially traded 95 points lower despite the Conference Board's index of leading indicators rising 0.6p in August. The fifth straight rise suggested the US recession is bottoming out and a recovery is near.

Royal Bank of Scotland, 2.9p down at 53.4p, led the retreat amid growing speculation it is planning a £4bn rights issue to reduce its reliance on the government's Asset Protection Scheme, set up to insure toxic bank loans.

Fundraising talk dragged housebuilder Redrow 7.4p lower to 235p. Steve Morgan, the founder and owner of Wolverhampton Football Club, returned to the board earlier this year. He recently unveiled the worst loss in the company's history, following writedowns of £319m. He now wants to raise cash to help rebuild the balance sheet and to finance the purchase of new land.

Ahead of Marks & Spencer's second-quarter trading statement on September 30 and the investor day on October 13, Societe Generale upgraded its current year pre tax profit forecast by 10% to £654m and its target price to £5 from 445p.

Profit-taking in the absence of takeover developments left oil equipment services group Wellstream 11p cheaper at 689p.

Affecting sentiment too was news that chief executive Gordon Chapman will be incapacitated until the new year due to ill health. Malcolm Graham-Wood at Hanson Westhouse said: 'We believe that a number of companies have evaluated Wellstream and a bid is more than a possibility with or without a chief executive, as a result this is no time to let any shares go'.

Small buying in response to a positive trading statement lifted Plastics Capital, the maker of niche plastics products, 9.5p to 34p.

Portrait Software, a provider of customer interaction software, firmed 2.31p to 16.81p following an upbeat AGM statement and news that the company is now back in the black.

Allergy Therapeutics rose 1.25p to 18.5p on pleasing annual results, the first set of figures for newly appointed chief executive Manuel Llobet.

A refinancing transaction completed on July 1 helped to restructure the balance sheet through the reduction of debt.

News of a £17.6m placing helped Petroneft Resources advance 3p to 18.5p. It is now fully funded to reach year-round oil production in the third-quarter, 2010. Production is expected to reach approximately 4,000 barrels of oil per day by the end of next year.

Encouraging half-year figures failed to inspire Intelligent Environments, was unchanged at 11p. FinnCap reiterated its fair value price of 15p.