Market Report: Paragon rises on talk of predators in the wings

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The Independent Online

If you believe yesterday's stock-market gossip, Paragon, the buy-to-let mortgage lender, is being stalked by a series of larger players and a formal offer for the company could be just around the corner.

Although Paragon ticked 1p lower at 511.75p, its shares have soared 15 per cent over the past three weeks. In fact, during the past 14 trading days, Paragon stock has registered only two falls. According to gossips, an offer for the company could value Paragon shares at up to 650p each.

Sector analysts certainly agree that the company would make a good purchase for larger players such as HBOS and Bradford & Bingley. But they were quick to point out that Paragon has been viewed as a takeover target for some time and that its shares have been a lot cheaper in the past.

Some explained the dramatic jump in the group's stock price over the past few weeks as being a product of its lowly rating. Even now, it trades at just 10 times forecast earnings for the current year while boasting a double-digit profit growth rate.

Paragon claims to be less risky than run-of-the-mill buy-to-let players because it deals with professional property investors with a good track record. Whether the recent jump in its shares is a prelude to an offer for the company or whether it is merely because the company is starting to enjoy a re-rating of its stock, only time will tell.

In the FTSE 100, Marks & Spencer dropped 0.5p to 358.75p after Dresdner Kleinwort Wasserstein played down hopes of a fresh Philip Green-style offer for the company. The German broker said: "At current levels, we believe there is more downside risk in the stock than upside, especially given our view that a Philip Green-style bid would now fall well short of last year's 400p-a-share offer." It believes investors should reduce their exposure to the retailer.

Aegis was once again a talking point as the media buyer rose 4.5p to 114.25p. Bulls of Aegis are convinced that it is only a matter of time before the company is bought and reckon a deal will value it at up to 150p a share. Recent evidence that Goldman Sachs has been adding to its stake in Aegis has led to speculation that the investment bank is building a shareholding in the company on behalf of a predator.

Late last night, Vincent Bollore, the chairman of France's Havas, disclosed a 6 per cent stake in Aegis through his Group Bollore investment vehicle.

Larger oil explorers with exposure to Mauritania were all sold off heavily on news that the West African country's army had seized power. The coup, which ended President Taya's two-decade-long rule, was led by a group of officers and is reported to have been bloodless so far.

The officers have promised to rule Mauritania for a transitional period of two years after which they plan to organise free elections. Nevertheless, the news pushed Premier Oil 13.5p lower to 716.5p, Dana Petroleum 17.5p down to 716p, and BG 2p weaker at 488.25p.

Mauritania accounts for about 35 per cent of Premier's asset base and 21 per cent of Dana's, while BG has only a small interest in that part of the world. Investec Securities remained largely unperturbed by the developments in the West African country. It noted that the coup leaders have said they plan to honour all of Mauritania's international agreements and argued that investors should use any weakness in Premier's share price as a buying opportunity.

Lower down the pecking order, Civica rose 4p to 237.5p as brokers got excited about the company's exposure to the fast-growing world of government IT-services contracts. IFX, which owns a spread-betting firm, ticked 0.5p higher to 123p after issuing a bullish trading statement.

NMT rose 9.5p to 73.5p as it emerged that Volvere, the investment vehicle where the former Dixons boss Lord Kalms is chairman, has upped its stake in the needle-free syringe maker to 26 per cent from 16 per cent. Volvere, unchanged at 162.5p, is looking for boardroom representation at NMT. The investment group, which listed on AIM at the start of 2003, focuses on making money from turnaround situations.

Finally, Urals Energy enjoyed a strong debut on AIM. Morgan Stanley raised £64m of new money for the Russian oil company at 240p. Its stock closed at 254p, giving the company a valuation of more than £200m.

As with the majority of Russian floats, Urals Energy is registered offshore - in this case Nicosia, Cyprus. Among its directors is Leonid Dyachenko, the former son-in-law of Boris Yelstin, Russia's first president, and he controls 7.8 per cent of the oil explorer after the fund raising. Urals Energy said it will use the fresh money to fund its exploration programme.

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