Market Report: PartyGaming climbs on Morgan Stanley rating

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The Independent Online

For the second time in less than a week a leading broker urged investors to pile into PartyGaming. Yesterday, it was Morgan Stanley who slapped a "buy" rating on the internet poker giant, sending its shares 8 per cent higher to 118p.

The US broker said: "Our overriding view is that PartyGaming will remain a winner in what we think will remain a significant and profitable industry." Morgan Stanley is convinced the group can become the No 1 inthe online poker segment it domin-ates and also in the wider online casino arena.

Even after yesterday's jump, the shares trade barely above their 116p IPO price. After a profits warning in September they hit a low of 67p. Morgan Stanley admits that PartyGaming's growth rate will not be as high as originally hoped but takes the view that it is strong enough to justify a near-term price target of 130p on the shares. At present levels, the stock trades at a 22 per cent discount to its rival Sportingbet which the US broker views as excessive.

Elsewhere in the FTSE 100, which finished 13.6 points better at 5,491, Barclays lost 6.5p to 595.5p as Dresdner Kleinwort Wasserstein told its clients to switch from the banking giant to its rivals Royal Bank of Scotland, 4p better at 1,678p, HBOS, off 0.5p to 881p, and Northern Rock, down 3p to 839.5p. Although Barclays' trading statement did not contain any nasty surprises, the broker pointed out its shares have outperformed the sector over the past month, leaving them with a premium rating.

Game Group finished the day down 3.25p to 74.5p after it became the first retailer to issue a pre-Christmas profits warning. One of the main reasons for the setback was its inability to obtain sufficient supplies of two new consoles in time for Christmas.

But Game shares, which touched 65p at one point during the session, enjoyed a strong rebound towards the end of the day on hopes of a bid for the group. According to Numis Securities, there is a strong possibility that Gamestop of the US will turn up with an offer for the company once it has digested its merger with Electronics Boutique.

MFI Furniture ticked 0.25p lower to 71p as Panmure Gordon downgraded its rating on the stock to "sell" from "hold" before tomorrow's trading statement from the retailer. Panmure warned MFI might have to cut its dividend and launch a rights issue to fund a restructuring of its business. The broker said both scenarios are by no means a certainty. Whether MFI needs a cash call depends on the size of the reform envisaged by the company's management, according to Panmure.

UBS knocked sentiment towards WH Smith, 4.5p lower to 406p. The Swiss broker downed its stance on the retailer to "neutral" from "buy" and argued that recent rumours of a venture-capital bid for the company are wide of the mark. RHM ticked 2.75p to 265.75p on hopes the food maker's results next month will not be as bad as some had feared.

4Imprint jumped 12p higher to 276.5p on talk of strong trading at the promotions group. Asia Energy lost 5p to 465p after the Bangladesh coal developer raised £25m via a placing of new shares at 450p. The cash will be used to fund Asia Energy's Phulbari project.

Brokers were expecting Golden Ports to make a solid debut on the market today. The Athens-based shipping company is due to list at the top end of 275p-to-325p range. Golden Ports will certainly be attractive to income investors given its impressive dividend yield.

Petra Diamonds was pegged at 65.5p despite boasting of a major diamond find at its Sedibeng mine in South Africa. Neteller retreated 7.5p to 661.5p as Gord Herman, the group's chief executive, sold 1 million shares at 662.65p.

Meanwhile, Angus Monro bought 250,000 shares in Advanced Fluid Connections, the pipes business where he is chairman. Advanced Fluid rose 0.25p to 6p on the news of the purchase but brokers pointed out that Mr Monro's dealings in the past in the stock have been far from profitable. He was a big buyer at prices which were double the current level.

Tenon Group saw Bob Morton, the serial entrepreneur, raise his stake in the accountancy group to 7.7 per cent after the purchase of 1.2 million shares via his Southwind investment vehicle.

Finally, Coffeeheaven, unchanged at 12.5p, announced that Bill Currie, the former star retail analyst at BZW, had taken a 9.4 per cent stake in the Eastern Europe-focused coffee shop group. Mr Currie is believed to have picked up the bulk of his stake in the company's recent £6.3m fundraising, which is also said to have been supported by a series of heavyweight institutions.

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