Market Report: Care UK hits a new high on talk of contract wins

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The Independent Online

In the absence of much action among London's major companies, traders were left to focus on the small-cap end of the market yesterday in the hope of making a quick turn. Among the major beneficiaries was Care UK, the nursing home and hospital operator. The company saw its shares leap 7.5p to their highest level yet, at 315p, as punters bet that the group's next results are set to impress.

Care UK is forecast to deliver double-digit earnings growth over the next three years. But nearer term, punters believe the company is close to winning a series of contracts, which should be made public in the coming months. Bulls of the stock pointed out that Schroders Investment Management has been rapidly accumulating a stake in the company. At the last count the fund manager's holding stood at 17 per cent.

Elsewhere, Axis-Shield, up 8p to 187.5p, benefited from some bullish comments from a series of Norwegian brokers ahead of results from the biotech later this week. Axis-Shield is listed in both London and Oslo and among the brokers pushing its stock higher were the Norway-based Carnegie Securities and Den Norske Bank. Carnegie talked of positive news flow from Axis in the wake of the group's figures and tipped the stock to enjoy a strong re-valuation in the coming months.

Monterrico Metals jumped 68.5p to 488.5p on talk that the company's management team had given mining majors until 1 October to table bids for the company. Back in May, the group in effect put itself up for sale when it appointed HSBC as a strategic adviser. Numis Securities believes Monterrico's directors, who are major shareholders, are keen to crystallise their interest in the company so that they can go on to start a new mining venture.

Monterrico's major asset is Rio Blanco copper project in Peru and the broker suggested yesterday that it may soon come out with a statement upgrading the size of the find. Numis hiked its price target all the way to 704p. Contentfilm, also on AIM, ticked 1p higher to 14.25p after Huw Davies, a non-executive, bought 22,000 shares at 13.5p, taking his total holding to 400,000.

Mears, which provides support services to councils, gained 10p to 193.5p on the back of forecast-busting interim results. Pre-tax profits rose 40 per cent to £3.2m, easily beating analyst expectations.

Mears is now well on its way to achieving a profit of £7m for the year. And word has it the group last week secured another local authority deal worth about £50m. Investors should not be surprised to see the group top City forecasts at the full-year stage.

Market professionals were surprised to hear news that Tanfield, 0.25p better at 9p, had raised £4m via a placing at 10p. It is rare these days to see a company secure cash from investors at a premium to the prevailing market price. Tanfield will use the cash for an acquisition and word has it the group is about to buy a business at bargain basement prices. If yesterday's gossip proves correct, Tanfield could be trading at as little as four times expected earnings after the deal.

It would be wrong to suggest that the large-cap universe was totally devoid of interest yesterday. Northumbrian Water added 0.75p to 141.5p amid rumours of a 175p a share bid for the group. Analysts, however, were far from convinced by the talk.

There were also whispers that ITV, down 1.5p to 103.5p, may be interested in making a move on SMG, where it already has a 16 per cent stake. Given SMG's lowly share price, now would certainly be the time for ITV to execute such a move. Shares in the group trade below 100p and at just 16 times next year's earnings. But despite the excitement of gossips, SMG stock failed to respond and ended the day 1p lower at 95p.

SABMiller rose 5.5p to 691p as WestLB started coverage of the brewing giant with an "outperform" recommendation and set a bullish 825p price target. It believes that the group can deliver superior organic growth to all its rivals over the next three years. Alexon improved 4.5p to 328p as brokers finally cleared a large seller from the market.

And finally, Credit Suisse First Boston urged its clients to steer clear of Yule Catto, off 1p at 265.25p, ahead of its interim results next week. The Swiss broker is primarily worried about the very high raw material costs which the speciality chemicals group is presently facing. It calculates that the group's key raw materials are currently at their highest level for 10 years.

This is playing havoc with profit margins at the chemicals group and as a result CSFB has had to downgrade its profit forecasts for Yule Catto by 8 per cent this year and 2 per cent next. The broker is now among the most bearish in the market on the stock. As for next week's first half results, CSFB expects profits to slump to £18m from £36m.

Market Movers

¿ Hilton Group 261p (up 1p, 0.4 per cent). Morgan Stanley lifts its price target to 320p from 300p after last week's forecast-busting results from the group.

¿ William Hill 543.5p (up 3.5p, 0.7 per cent). The group buys back 100,000 of its own shares for cancellation.

¿ AstraZeneca 2,555p (up 7p, 0.3 per cent). SG Securities upgrades its rating to "hold" from "sell" and predicts that US regulators will give the green light to its Exanta product later this month.

¿ Brambles Industries 242.5p (up 23.75p, 10.9 per cent). Brokers upgrade after strong full-year results from the pallets group.

¿ Manchester United 261.5p (up 4.5p, 1.8 per cent). Reaches agreement to buy Everton's star striker Wayne Rooney.

¿ Matalan 206.25p (up 6.5p, 3.3 per cent). Resurgence of talk of a bid for the group from Wal-Mart.

¿ Carillion 192.5p (up 4.25p, 2.3 per cent). Institutional demand drives the stock higher.

¿ Barratt Developments 592p (up 11.5p, 1.9 per cent). Completes the sale of Barratt USA.

¿ UA Group 975p (up 225p, 30.0 per cent). Announces that it is in talks which may lead to a bid for the group.

¿ Tecteon 2.5p (up 0.25p, 11.1 per cent). News of strategic alliance excites.

¿ Dicom 699p (up 25.5p, 3.7 per cent). Makes £27m bid for Austria's Topcall International and posts strong full-year results.

¿ Independent Media Support 63.5p (up 2p, 3.2 per cent). Wins subtitling deal with Channel Five.

¿ Xenova 9.12p (up 0.12p, 1.2 per cent). Sells its Canadian manufacturing facility for £3m .

¿ LogicaCMG 160.5p (down 6.25p, 3.8 per cent). Nervousness ahead of today's interim results from the IT services giant.

¿ Sage Group 163.5p (down 4.5p, 2.6 per cent). Falls across the Atlantic on Nasdaq weigh on London-listed technology stocks.

¿ Bunzl 424p (down 7.5p, 1.7 per cent). Deutsche Bank reiterates its "sell" rating after interim results from the packaging group.