Market Report: A grey day for BSkyB as broker says 'sell'

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The Independent Online

Next week sees second-quarter subscriber figures from the broadcaster BSkyB, and, although the company is expected to report decent growth, the broker Dresdner Kleinwort sees tougher times ahead.

While brokers are broadly positive on the company, Dresdner believes the shares are looking expensive on 20.4 times forecast 2007 earnings, and that competitive pressure could mean the second half of the year could be much tougher than the first. The broker sees downside risk coming from churn, marketing costs and broadband investment. There has also been much speculation on the future of its chief executive, James Murdoch, and there would be few eyebrows raised if he were to step down sooner rather than later. Dresdner reiterated its 450p target price and "sell" advice on the shares, which closed 2p worse at 543p.

The plumbing supplies giant Wolseley regained some of Monday's losses, surging 43p to 1,392p in early trade thanks to a "bear squeeze", with traders rushing to close out short positions. The shares also benefited from positive broker updates, with Deutsche Bank, Credit Suisse and Citigroup urging clients to buy the shares, with the latter reiterating its 1,680p target price. An afternoon bout of profit-taking left the stock 10p better at 1,359p.

London shares were flat despite the overnight sell-off on Wall Street, as the mining sector propped up the blue-chip index, thanks to stronger metal prices. Rio Tinto rallied 85p to 2,660p, with BHP Billiton 22p firmer at 939p. The FTSE 100 closed just 9.2 firmer at 6227.6, mainly thanks to Tate & Lyle's shock profit warning that sent shares in the sugar producer 112p lower to 608p.

After a couple of weeks in the doldrums, mid-cap oils found buying support on the back of some encouraging broker comment. Bridgewell Securities is expecting a confident trading statement from Premier Oil tomorrow and upgraded its recommendation from "neutral" to "overweight" helping the shares climb 8p to 1,140p. Burren Energy was also in demand, 17.5p firmer at 767p, with JKX Oil & Gas enjoying a 2.5p rise to 260p.

An insurance sector review by Credit Suisse resulted in a downgrade for Amlin following a Florida court's decision to approve of a scheme to subsidise purchases of reinsurance by residential property insurers. Amlin shares fell 19.25p to 304p. However, an upgrade for Hiscox, with a target price raised to 290p, failed to stop the shares from slumping 17.75p to 247.75p.

A bullish update on the housing sector from Collins Stewart helped the sector make up some of the recent losses on last week's shock interest rate rise. The broker believes the ongoing auction for Wilson Bowden, being fought out by Barratt Developments, George Wimpey and HBOS with the entrepreneur Sir Tom Hunter, could easily see the price go to a 40 per cent premium on the pre-bid level, implying up to 2,500p per share. Shares in Wilson Bowden rallied 43p to 2,320p. Upbeat comments on Taylor Woodrow and Redrow had less impact as those stocks fell 1.5p to 409.25p and 5.5p to 626.5p respectively.

At the small-cap end of the market, follow-through selling on Monday's warning forced Telephone Maintenance Group another 16p lower to 48.5p, the worst performer on AIM. Market makers said that, despite the sharp falls, few buyers were tempted into the stock and a swift recovery is not expected.

Global Petroleum was also in the red following a disappointing drilling update from its Pomboo-1 prospect in Kenya. The well will be plugged, but market makers said that the shares, 5.25p worse at 12.25p, are looking oversold as the company had only a 20 per cent interest in the well. The shares are also listed in Australia and Germany, but lost less in those markets.

The struggling healthcare information technology provider iSoft found some buying support on the back of reports that three possible buyers have formally approached the company and the price tag could be up to £200m, implying a takeout price of 87p per share. Even if the talks are at an advanced stage, talk of an offer in the region of 87p per share looks high, despite the shares adding 5.5p to 55p.

It has been a long time since Laura Ashley shares hit the dizzy heights of 28p, more than six and a half-years, to be accurate. However, bullish broker comments and renewed investor enthusiasm helped the shares rise 1.25p to 28p, continuing the recent chart breakout, and traders expect the stock to gather momentum.

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