Yesterday's trading: Kensington up for sale

By GEOFF FOSTER FOR MAILONLINE
Updated: 03:09 EDT, 20 February 2007

A 'for sale' sign was hoisted above the London headquarters of Kensington Group after the specialist buy-to-let mortgage lender said it is considering the best options to maximise shareholder value.

Punters interpreted that as the board saying it is open to offers and chased the shares 120½p higher to 882p.

Kensington welcomes with open arms people who experience difficulty in obtaining mortgages or loans from high street banks. Over the past few years it has received various informal approaches from interested parties which have been rejected.

Former building societies turned banks, Bradford & Bingley and Alliance & Leicester, are both believed to have had a good look at Kensington as did a major US bank.

An influx of aggressive investment banks into the subprime mortgage market have increased pressure on Kensington's margins. A profits warning in November and growing fears about arrears and bad debts unsettled the share price until yesterday's statement sparked a long-awaited recovery

Analysts at Keefe, Bruyette & Woods says fair value for Kensington is 1,290p although they expect any offer will start below 1,050p.The buyer should be an investment bank looking to build an integrated securitisation model. Lehman Bros, Merrill Lynch, Morgan Stanley and Deutsche Bank could feature.

Meanwhile, rival broker Numis asks a pertinent question. Why has management looked to sell the business and why would a U.S. bank look to buy at this stage of the cycle? Kensington is a very highly leveraged play on property prices.

Should house values give up just a modest proportion of the 184% increase of the past decade, then Kensington's profitability will decline dramatically.

Consumer finance business rival Paragon advanced 17p to 637p in sympathy.

With Wall Street closed for the Presidents Day holiday, dealers in London had the investment stage to themselves. They wasted no time in chasing the fabulous Footsie up a further 24.9 points to a six year high of 6,444.4. The FTSE 250 rose 79.7 points more to a record 11,636.1 and the FTSE 350 14.7 points to an all-time high of 3,392.9.

Miners struck it rich with Anglo American closing 84p up at 2622p. Buyers dug in amid reports that Russia's Polyus Gold had made an approach to buy a £2.25bn stake in Anglo Gold Ashganti.

Speculation was also rife that Anglo will announce a £4bn share buy-back plan with tomorrow's interim figures. Firmer commodity prices boosted the rest of the sector with Lonmin ending 94p up at 3290p, Kazakhmys 27p at 1126p and Vedanta Resources 23p at 1309p.

As dealers patiently await the next move by private equity giant CVC and 'friends', continuing speculation that Stuart Rose at Marks & Spencer (1½p dearer at 694p) is considering shopping at J.Sainsbury helped shares of the supermarket giant climb 8¾p to 512¾p.

Polygon Investment Partners, the London and New York based hedge fund, obviously believes its days of independence are numbered. It has bought a further 9.5m contracts for differences, or CFDs, in Sainsbury and now holds derivatives representing 26.5m shares, or 1.54%.

The purchaser of a CFD pays only 10% of the value of the underlying stock to acquire a position, a very cost-effective way of buying an influential position in a company.

Capita, which handles the London congestion charge which yesterday controversially extended to the West of London, rose 9p to 668p ahead of Thursday's results.

Over on Aim, Uramin jumped 20½p to 260½p after saying it plans to examine its strategic options as it develops its three advanced uranium properties in Namibia, South Africa and the Central African Republic to the definitive feasibility study stage.

Kryso Resources edged up ½p to 12⅛p following upbeat drilling results from its 100%owned Pakrut Gold Deposit located in the Tien Shan Fold Belt in the Republic of Tajikistan. Despite a very encouraging drilling report from its nickel interest in eastern Canada, Landore Resources eased ¼p to 12¼p.

Arian Silver Corporation firmed 1¾p to 25¼p following a bullish Mexican drilling report.

Worries about the group's debt left Biofuels Corporation 1½p easier at 28½p.

Hardide, a provider of unique surface engineering technology, edged up ¼p to 8⅞p after securing its first new customer (Expro Group) for its recently opened coatings facility in Houston, Texas.

Director Mark Loveland's purchase of 200,000 shares at 42p a share left Manpower Software 5¼p better at 44½p.

• Israeli-based MTI Wireless Edge, the world leader in antennae for fixed broadband wireless with a 25% market share, reported excellent annual results and rose 1p to 51p. Net operating profit margins jumped to 20.1% from 17.5%, doubling pretax profits to £1.9m. The forward order book is strong and with more than £6m cash in the bank, a bolt-on acquisition outside Tel Aviv is on the cards.