Market Report: Credit Suisse sweetens (a bit) to Tate & Lyle

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The Independent Online

Analysts at Credit Suisse will be hoping they get their advice better next year on the sugar producer Tate & Lyle. The Swiss broker has had an "underperform" rating on the shares all year, during which it has rallied more than 40 per cent and regularly hit all-time highs.

Credit Suisse finally bit the bullet and raised its price target for Tate yesterday, from 525p to 750p, but kept its recommendation at "underperform" as the shares climbed another 8.5p to close at 820.5p. The broker believes the current valuation, at 15.1 times forecast 2008 earnings, is "rich", but stopped short of rating the shares as an outright "sell".

With traders in bullish mood ahead of the last full trading week of the year, a downgrade for BG Group by the broker Citigroup went largely ignored. The US investment bank believes the gas production group will struggle to maintain its record of growth and that could lead to the shares losing some of the premium that they trade at in comparison to the company's peers. Citigroup, which still rates BG at "hold", cut its price target to 680p from 725p, although the stock closed up 10.5p at 706p.

BAE Systems and Rolls-Royce were among the big winners in the blue-chip index after the Government pulled the plug on a Serious Fraud Office investigation into the arms manufacturer. The investigation had threatened to derail an order for 72 Eurofighters from Saudi Arabia. BAE closed at 424.5p, 27.25p up on the session. Rolls-Royce, the engine maker, closed 6.5p firmer at 440.25p.

A mixture of corporate activity, merger and acquisition developments and a strong opening on Wall Street helped the FTSE 100 to rally 32 to close at 6,260, a new high for the year.

The rumour of the day in the mid-caps was that Big Yellow Group, the self-storage warehouse operator, is in line for a bid from a private-equity investor that could value the shares at up to 700p each, giving the company a value of £800m. Shares in Big Yellow have more than doubled this year, and closed at 620.25p, 32p better.

Ashmore Group, the emerging-markets debt fund management group that listed in October, fell 17.75p to 242.25p as the broker Goldman Sachs removed it from its "conviction buy" list. Goldman retained its "buy" rating on Ashmore, but cut it from its top recommendation list after the shares gained more than 29 per cent in the past month.

Also high on the list of mid-cap fallers was Charter, the engineering group, as traders tucked away some profits ahead of the Christmas break. The shares have been one of the best performing stocks on the London markets over the past three years and have added more than 80 per cent in the past 12 months, on top of a gain of approximately 1,100 per cent between February 2003 and last December. The shares fell 18p to close at 876p.

Forth Ports also suffered a bout of pre-Christmas profit-taking, 24p worse at 2,146p, despite the belief the company will face a bid early in 2007. Any investor who bought this time last year should have made a gain of approaching 40 per cent, and traders said if a bid does not now come the shares could easily track back towards 1,900p.

There was a mixed bag of trading in the housebuilding sector ahead of trading statements due next week from Persimmon, 3p lower at 1,494p, and George Wimpey, 6p better at 570p. Crest Nicholson, still awaiting bid developments from Sir Tom Hunter and HBOS, fell 7p to 620p on speculation that the same bidder is also in the running to buy Wilson Bowden. Castle Bidco, the bid vehicle, has until 12 January to firm up its offer for Crest Nicholson.

In the small caps, the biotechnology group Lipoxen soared 6.5p to 32p, a 25.5 per cent jump, on news that the company has signed a deal worth a potential $75m (£38m) with the US giant Baxter International. Lipoxen develops blood-clotting agents used mainly in treating haemophilia, and despite yesterday's gains the deal is still worth approximately the same as the group's current market capitalisation.

Ceramic Fuel Cells, the developer of home fuel-cell technology, was also in demand after signing a deal with the French gas giant Gaz de France, to develop a heat and power unit for the French domestic market. The stock closed 4.5p better at 34.5p as 4 million shares changed hands.

Finally, Imaginatik, a corporate infrastructure software developer with clients including Hewlett Packard and Pfizer, had a decent start to life as a listed company after a placing that raised £1.5m of new capital. The shares were placed at 7.5p by the broker WH Ireland and closed at 8.37p.

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