Market Report: Educational sale not enough to boost Reed

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The Independent Online

After underperforming against the market for much of the past few years, investors in publishing group Reed Elsevier had hoped the sale of its educational publishing unit would give the group a much-needed shot in the arm.

However, just two trading days after the announcement, the broker Citigroup told clients the upside was all in the price. In a note published after the market shut on Friday, the broker cut its rating on the shares to "hold" from "buy", sending the shares 11.5p worse to 624.5p. It also told clients the chances of a leveraged buyout had dipped and debt markets were now "pricing in significantly less probability of a deal". It looks as if the rally could be over almost before it has even begun for Reed.

The brewing group Scottish & Newcastle, 7.5p better at 575p, was again stronger before today's full-year numbers. Credit Suisse made positive noises although how the shares are going to "outperform," as the broker suggests, while at the same time having a 550p price target, is anyone's guess.

Stories about a private equity bid for the consumer credit rating agency Experian were doing the rounds again, although there was little new to go on. The company is thought to have turned down a £7bn bid from a consortium of private equity houses before it demerged from GUS in October. Traders believe the chances of a bid at this stage are slim. The shares ticked 10p better to 622p.

Goldman Sachs reviewed the water sector and added United Utilities to its "sell" list. The broker sees "material regulatory downside risk" to the water and electricity supplier and cut its price target to 520p, sending the shares 4p worse to 766p. However, some traders were puzzled by the broker's recommendation and price target for Kelda Group, 13.5p worse at 924.5p. Goldman believes that although the buy-back programme will provide short-term support, the shares are worth just 774p, 17 per cent below yesterday's opening price. However, Goldman maintained its "neutral" rating on the shares.

London shares were strong in early deals on the back of Wall Street's record close on Friday, but US markets were shut yesterday due to the President's Day national holiday so trade was listless in the afternoon. Even so, the FTSE 100 closed 24.9 better at 6444.4, yet another six-year high.

Longer-term investors in Daejan Holdings, the Indonesian property investment group, must be wondering whether inclusion in the indices is worth the bother. The company was included in the mid-cap index in December for the first time having been excluded previously due to liquidity issues. Since then, the stock's volatility has risen sharply. Having gone from a steady if unspectacular progress, the shares are making a daily appearance on the biggest movers list and yesterday lost another 120p to 5,180p.

Enterprise, the mid-cap support services group, surged 53p to 584p, the best performer in the FTSE 350, after it confirmed it was in bid talks with the private equity group 3i. The bid could value the shares at 605p each, an 18.8 per cent premium to yesterday's opening price. Bid talk has been in the air for a while, but that did not prevent some traders thinking it was Enterprise Inns that was being bid for, even if 605p would have meant a 9 per cent discount to its opening price. 3i closed 7p firmer at 1,154.5p while Enterprise Inns managed to close in the black, 6.5p better at 672p.

The risks associated with investing in illiquid small stocks was highlighted by Bodisen Biotech, the Chinese biodegradable fertiliser group, as the shares tumbled again and closed at an all-time low. The shares are thinly traded and touched 1,050p in March soon after coming to the market at 900p. They traded 17.25p worse by noon before a mild late rally saw the shares close 3.5p worse at 202.5p.

A bullish report last week from Anglo Asian Mining helped the shares climb another 4.5p to 22.75p, and the stock has now added more than 50 per cent since the start of the month. Business was brisk as more than 1 million shares changed hands, almost 10 times the average daily volume. Thursday's bullish drilling update from the company's Azerbaijan gold and copper project has investors excited and the word is that there could be more good news.

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