Market Report: BSkyB boosted by bullish subscriber forecasts

Investors were busy hoarding BSkyB shares yesterday as Credit Suisse First Boston tipped the satellite broadcaster's key third-quarter subscriber numbers to easily beat expectations. BSkyB jumped 14p to 577.5p as the Swiss broker told clients that the positive momentum seen at the group over Christmas had continued into the New Year.

Investors were busy hoarding BSkyB shares yesterday as Credit Suisse First Boston tipped the satellite broadcaster's key third-quarter subscriber numbers to easily beat expectations. BSkyB jumped 14p to 577.5p as the Swiss broker told clients that the positive momentum seen at the group over Christmas had continued into the New Year.

CSFB said: "We believe that Sky is already benefiting from its long-term marketing drive and from its new pricing and packaging initiatives. In our view the market has underestimated management's determination to over-deliver on subscriber growth, particularly after last year's warning."

It forecasts BSkyB to have secured an extra 80,000 new customers during the third quarter, well ahead of the 60,000 expected by most City analysts. Subscriber growth figures are very important to the satellite broadcaster and since last August's setback the group has consistently outperformed on this measure. Its first- and second-quarter figures topped expectations and CSFB believes BSkyB shares will motor when the company achieves the same feat for the present quarter.

In the brokers words: "A third consecutive quarter of over-delivery would establish a trend and mitigate the perceived executive risk surrounding Sky's new strategy and targets."

Meanwhile, Citigroup Smith Barney became the second broker in as many sessions to warn that the fallout from GlaxoSmithKline's manufacturing problems in Puerto Rico is far from over. The US broker cut back its rating on GSK, up 8p to 1,232p, to "hold" from "buy" and also downgraded its 2005 earnings forecasts for the pharmaceuticals giant by 8 per cent. Citigroup fears that the US Food & Drug Administration will be very tough on GSK over the incident, given the company's apparent failure to deal with four warning letters from the regulator. On Friday, Nomura Securities issued a similar warning to investors.

The wider FTSE 100 rose 10.2 points to 4,933.5. Dixons dropped 0.75p to 150p after fellow electricals retailer Jessops issued a profits warning which blamed a general slowdown in consumer spending, particularly a significant drop in demand for certain digital cameras. After the alert, Numis Securities reiterated its "trading sell" stance on Dixons. "We believe today's warning from Jessops gives further evidence of a slowdown across the big-ticket electricals market as a whole", Numis said.

Woolworths dropped 1p to 54.5p as Bridgewell Securities argued there was little hope of a counter offer for the discount retailer and so told its clients to take profits from the stock. Although the broker said it was pretty confident that Apax Partners will complete its 58.2p-a-share offer, it argued there are always risks in such bid situations. Elsewhere in the retail arena, Matalan, 3.25p better to 237p, was the flavour of the day among punters as they took the view that it too is unlikely to make it to the end of the year as a listed company. Matalan is said to be trading well at present but analysts believe any bidder will have to pay more than 300p a share if John Hargreaves, the group's chairman and its largest shareholder, is to agree to a deal.

CSR fell 3.5p to 352p after John Hodgson, its chief executive, exercised options over 150,000 shares and then sold them at 350p.

HIT Entertainment rose above Apax Partners' 300p-a-share offer price, to close 12p higher at 305p, as traders took the view that a counter bid for the children's character group is a distinct possibility. In the past, Disney and the US cable group Viacom have been tipped as likely buyers of HIT.

Vislink ticked 0.25p higher to 31p after the broadcasting equipment specialist reported inline full-year figures. Vislink did well last year from a contract to supply Venezuela's national broadcaster with the latest kit, and investors should not be surprised if the group wins more business from the South American country over the coming year. Medsea Estates was steady at 70.5p despite news that annual profits at the Spanish estate agent had doubled to £2.2m.

The packaging group Macfarlane added 0.25p to 35p on whispers that today's full-year figures will not disappoint. Diploma ticked 6.5p higher to 740p on talk of strong trading at the group's US division.

Finally, Shield Capital enjoyed a strong debut. After raising £850,000 at 5p, shares in the group closed at 7.62p. It also emerged that Simon Mathias, one of Shield's directors, had picked up 100,000 shares at 7.5p during the group's maiden session. The company hopes to make an acquisition in the UK's fast consolidating financial services sector.