Market Report: Dealers check into Hilton on talk of cash return

Hilton finished the day as the best performer in the blue-chip index, up 7.5p to 315p, but a more likely explanation for its share-price strength is the bullish research ABN Amro published about the group. The Dutch broker is convinced that Hilton is in rude financial health, and told investors that a significant return of cash to shareholders could be on the cards given the group's programme of disposals.

ABN said: "In our view, Hilton remains in good financial shape. Hotel real estate worth £400m is on the market and more asset sales are possible later. This could lead to significant cash returns over the next 12 months." The broker also raised its price target on Hilton stock to 375p, from 350p, and did not rule out a takeover of the company.

ABN suggested that the group's disposals could leave the remaining rump of its business as a manageable and tasty proposition for a rival to acquire. According to the Dutch firm, Hilton's American sister business, HHC, would have most to gain from fully reunifying the global Hilton brand, but hinted that such a deal is likely to be some way off for now.

Marks & Spencer, up 7p at 377p, was boosted by a flurry of large buy orders in the last half hour of trading, which sparked rumours that the retailer could once again find itself on the receiving end of a takeover bid. The Bhs owner Philip Green, who tried to acquire M&S last year, was of course mentioned as a possible buyer along with the financier Robin Saunders, who was said to be keen on putting together a private-equity consortium to bid for the retailer.

A more likely explanation for the recent spike in M&S shares is the fact that a something of a recovery seems to be coming together at the company. In the past month, directors have spent more than £1m buying shares, and this week Deutsche Bank suggested that M&S' forthcomingtrading statement will probably be an upbeat affair.

PartyGaming was not so lucky as its shares fell 8p to a new low of 87.5p. In fact, investors abandoned the online-gaming sector en masse yesterday after a disappointing debut by the internet casino 888 Holdings. The company's initial public offering was priced at 175p but the stock quickly lost ground to close at 170p. Elsewhere in the industry, Empire Online dropped 1.5p to 175.5p, Sportingbet fell 10p to 311p and World Gaming lost 3p to 184.5p. Ukbetting bucked the negative trend in the sector, adding 1.75p to 54.25p on rumours the group has received a bid approach which could value it at more than 75p a share.

Northern Rock jumped 8.5p to 828p as Deutsche Bank argued that the UK housing market is once again on the up, singling out the bank as likely to be a major beneficiary of such a scenario. The German broker set a 920p price target on Northern Rock.

HMV dropped 8.5p to 201.5p as ABN Amro slashed its forecasts on the music retailer after Wednesday's dire trading statement from the group.

SkyePharma gave up a further 2.75p to 39.25p after the broker ING expressed disappointment that the biotech was progressing with Phase III trials of its asthma treatment Flutiform. Having failed to secure a partner to help fund research of the drug, SkyePharma has decided to raise £35m through a rights issue. EasyJet tumbled 6.5p to 289.75p as Merrill Lynch sold 3.8 million shares at 288p on behalf of a client. The deal raised nearly £11m for the seller, who is thought to be neither the easyJet founder Stelios Haji-Ioannou nor Icelandair, which, at the latest count, holds 13 per cent of the budget airline.

Among smaller companies, Cambrian Mining ticked 0.5p higher to 173.5p after selling 4.3 million of its shares in Asia Energy at 645p. Cambrian booked a £27m profit from the disposal, and retails a stake of 4.5 million shares, or 11.3 per cent, in the Bangladesh-focused coal explorer. Asia Energy fell 17.5p to 692.5p. Peter Hambro Mining put on 33.5p to 816p as the City applauded the group's purchase of a majority stake in a new Russian exploration venture.

Hartest Holdings added 0.03p to 0.53p as Peter Gyllenhammar, the Swedish investor, raised his stake in the healthcare-equipment maker to 11.2 per cent from 8.9 per cent. DAT Group slumped 10p to 62p after the software group said it is considering an equity fund-raising. In its short time on the stock market, DAT soared to a high of more than 500p in March, but has been in retreat after a massive profits warning.

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