Market Report: HIT surges on hopes of breakthrough in US

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The Independent Online

Hopes that HIT Entertainment, the media rights group which owns the children's TV character Bob the Builder, will very soon announce that it has finally broken into the US sent shares in the group 8 per cent higher yesterday, or 18.25p to 234p. HIT has in the past indicated that it wants to enter the US market, possibly by taking a stake in an existing American kids TV channel. The excitement surrounding the company yesterday was caused by Bridgewell Securities, which hinted that a deal is "imminent".

Hopes that HIT Entertainment, the media rights group which owns the children's TV character Bob the Builder, will very soon announce that it has finally broken into the US sent shares in the group 8 per cent higher yesterday, or 18.25p to 234p. HIT has in the past indicated that it wants to enter the US market, possibly by taking a stake in an existing American kids TV channel. The excitement surrounding the company yesterday was caused by Bridgewell Securities, which hinted that a deal is "imminent".

According to recent speculation, HIT is looking to link up with US cable giant Comcast and Sesame Street Workshop to develop a 24-hour channel dedicated to the entertainment of pre-school children. Bridgewell believes any such offering from HITis likely to be highly competitive in the US and give Hit's top line a strong boost. As a result, the broker urged its clients to buy into the group and set a 315p price target on the stock.

Meanwhile, in the IT sector, LogicaCMG gained 8p to 171.25p after Deutsche Bank moved its clients into the stock ahead of Logica's 22 July trading statement. The German broker is of the view that investors should take advantage of the recent weakness in the group's share price and assured them that any downgrades to profit forecasts in the wake of the statement are now factored into the stock.

"The market is now discounting the worst case scenario on forecasts," said Deutsche. It went on to argue that investors have became too cautions on Logica of late saying: "We feel that the trading statement set for 22 July should provide clarity to the market that the business has not gone into meltdown." The broker tips this to act as a catalyst for a strong jump by the IT group's shares and so upgraded its recommendation to "buy" from "hold".

Among blue chips, British Airways dropped 5.25p to 244.75p on talk that a major City broker had spent most of yesterday's session moving its best clients out of the stock. Wolseley jumped 42.5p to a new high of 875p after a bullish trading update from the building materials group boasted of a strong performance from its North American and UK businesses.

Hilton dropped 4.5p to 256.5p while InterContinental Hotels retreated 3p to 561.5p after the duo were downgraded to "hold" from "buy" at Citigroup. The broker is certain that the European hotels sector has had an outstanding 2004 so far, but told investors to get ready to reduce their exposure to the industry as the news is slowly made public, thereby adhering to the old stock market adage "sell on good news".

Burren Energy dropped 36p to 325p as Seymour Pierce and KBC Peel Hunt placed £80m worth of shares on behalf of a series of early stage venture capital investors. The two brokers placed 24.5 million shares at 325p. Burren has been on the market for just seven months but they have been seven very successful months. It floated at just 130p and has seen its stock soar since then following a series of bullish production updates. Gossips yesterday talked of further positive drilling news in the near future.

Courts recovered 2.5p to 83p as word spread that a large seller has finally been cleared. Schroders Investment Management, Courts' largest single shareholder, helped clear the stock overhang as it picked up 415,000 shares, taking its total stake to 10.7 million or 17.6 per cent. The seller is believed to have been a US hedge fund which picked up around 1.7 million shares from a long-term institutional shareholder, possibly Fleming Asset Management, which was keen to exit the stock after last month's news of a cash crunch at the retailer.

The US hedge fund, which bought the holding at what was then a good discount to the going price, had hoped to make a quick buck by drip feeding the stock into any rally by Courts. But it soon realised that it was stuck holding a very illiquid share in a company which is essentially at the mercy of its bankers. The hedge fund rushed to exit Courts, at pretty much any price, causing the retailer to trade as low as 77.5p at one point on Monday.

Elsewhere in the sector, Homestyle jumped 3p to 115.5p on talk that the group has received a £150m bid for its Benson's Beds division from its management team. The unit's management is said to have originally offered £125m for the business but had this offer turned down by Homestyle's main board of directors. Benson's Beds is said to be trading strongly at present. But should Homestyle secure a price anywhere near the level talked about yesterday, market professionals expect Homestyle shares to soar. The group is presently valued at £75m.

Mears rose a further 4p to 180p as a plethora of brokers raised their profit forecasts for the support services group following Monday's record contract win from Sheffield City Council. Among them was Investec Securities, which raised its 2005 estimate by 9 per cent.

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