Market Report: Place your bets on William Hill, says UBS

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The Independent Online

It's boom time in the UK gaming industry according to UBS, and if investors want a piece of the action the broker yesterday advised that they pile into William Hill. UBS is convinced that trading at the bookie is very strong at present, partly thanks to the company's new fixed odds betting terminals and partly due to a general improvement in the company's underlying business. It predicts that this is set to continue for some time to come as new products drive profitability in the medium term.

It's boom time in the UK gaming industry according to UBS, and if investors want a piece of the action the broker yesterday advised that they pile into William Hill. UBS is convinced that trading at the bookie is very strong at present, partly thanks to the company's new fixed odds betting terminals and partly due to a general improvement in the company's underlying business. It predicts that this is set to continue for some time to come as new products drive profitability in the medium term.

William Hill shares shot to the top of the FTSE 100 gainers list, up 23p to 539p, as the Swiss broker not only upgraded its rating to "buy" from "hold", but also raised its profit forecasts. It believes that the group's stock should trade closer to 600p. Meanwhile, the FTSE 100 index itself managed only a 7 points rise to 4,362 as shares on both sides of the Atlantic were held back by anxiety over the oil price, which crossed the $48 a barrel level.

BAE Systems was the worst blue chip performer, falling 5.5p to 204.5p, after its own broker, ABN Amro, warned that debt at the defence group is likely to rise from the £870m seen last year. Many in the market had expected debt to fall, and given the share price reaction it clearly unsettled some players.

Barclays was also in retreat, closing 9.5p weaker at 503.5p, as Dresdner Kleinwort Wasserstein cut back its rating on the banking giant to "hold" from "add" and advised that there was better value elsewhere in the sector. The broker warned that the main danger to its downgrade is if Barclays were to receive a bid, as was rumoured earlier this month.

Sage ticked 0.5p higher to 165.75p after solid results from its US financial software peer Intuit, while Carnival improved 23p to 2,582p on suggestions that next month's third quarter figures will beat expectations as the company continues to enjoy strong demand for its cruises.

Hedge funds again attacked Photo-Me, down 3.75p to 91p. Back in May they carried out a successfully raid on the photo booth operator, pushing its stock down from the 120p level to as low as 80p. At the time, hedge funds spread rumours that the group was about to issue a profit warning. These were proved to be totally unfounded by Photo-Me's June full year figures, which topped expectations. That, however, is of little importance to shorters. Their only interest is to see the group's shares fall once they have positioned themselves.

For the second successive day Amec, 11p stronger at 306p, was driven higher by bid speculation. This time around two names emerged as possible predators, namely Fluor and Foster Wheeler. Amec has a series of joint ventures with Fluor, including some for construction work in Iraq.

A profit warning from JJB Sports, down 32.75p to 183.75p, weighed heavily on fellow sports retailers. JD Group fell 15.5p to 169p while Blacks Leisure retreated 5p to 406p. JJB blamed the poor summer weather for the setback. "Clearly many other retailers will have been adversely affected by the poor weather," Investec Securities was heard telling investors.

Meanwhile, the South African owned broker urged its clients take a look at Homestyle, 0.5p higher at 110.5p. It predicts that the retailer could get as much as £150m for its Benson Beds division. Such a valuation would leave Homestyle with net cash of £47m, or 67p a share, and Investec believes this is likely to be returned to shareholders in the form of a sizeable special dividend.

Terrace Hill, the property developer chaired by Scottish millionaire Robert Adair, put on 2p to 31.5p after Nigel Turnbull, joint group managing director, bought 10,000 shares at 30p while Philip Leech, a non-executive, picked up 30,000 at the same price. Terrace Hill is 59 per cent owned by Mr Adair, who has recently had a great success with AIM listed oil and gas explorer Melrose Resources, where he is also a major shareholder.

Dealers reported that a sizeable short position has been built up in Ark Therapeutics, unchanged at 69p, ahead of next month's expiry of the lock-in governing shares belonging the biotech's early stage backers. These include Merlin Biosciences, run by biotech specialist Chris Evans, Nomura and Bank Invest AS. Shares in Ark have been a disappointing performer since the company's March float, which saw it come to the market at 133p.

Domino Printing put on 0.5p to 222.5p on talk that the company is enjoying strong sales growth both in Asia and the Continent. Gossips were excited about Marlborough Stirling, 3p better at 52p. They reckon the software group is close to securing an outsourcing contract from a major building society.

Finally, investors should keep an eye on ILX Group, unchanged at 68.5p. Word has it the training group will today unveil a £400,000 fund raising. ILX will use the cash to pay down its debt burden via a buyback of its convertible loan notes.

MARKET MOVERS

ITV 102p (up 2.25p, 2.2 per cent). Investors ignore a price target downgrade at Merrill Lynch.

Eurotunnel 18.25p (up 1.5p, 8.9 per cent). Short covering by hedge funds continues to drive the stock higher.

N Brown 118p (up 6p, 5.4 per cent). Dealers report demand for the retailer from institutional investors.

Property Fund Management 148.5p (up 45p, 43.5 per cent). Says it has entered into bid talks.

Provalis 8p (up 1.75p, 28.0 per cent). The biotech boasts that it has received approval from the Food and Drug Administration for its diabetes test.

PC Medics 1.07p (up 0.26p, 32.1 per cent). Announces its first profitable quarter to date.

Billam 25.5p (up 4p, 18.6 per cent). Excitement about the planned float of one of the company's investments continues.

Crown Corporation 230p (up 5p, 2.2 per cent). Says its is to list on the Xetra Exchange, which is part of Deutsche Borse in Frankfurt.

Aminex 10.75p (down 0.5p, 4.9 per cent). Signs co-operation deal with Liquefied Natural Gas, an Australian company.

Goshawk Insurance 46.75p (up 2.75p, 6.25p). Bid speculation again surrounds the insurer.

Sygen International 35p (up 2p, 6.1 per cent). Supply deal for one of the group's units excites.

Petroceltic 15.5p (up 1p, 6.8 per cent). Goes one step closer to developing its site in Tunisia after securing a deal with an oil rig provider.

SkyePharma 53.25p (up 0.25p, 0.5 per cent). ING Financial Markets upgrades the stock to "strong buy" from "buy".

Marconi Corp 584.5p (down 15.5p, 2.6 per cent). Directors at the telecom equipment maker cash in on their stock options.

Trinity Mirror 643.5p (down 15.5p, 2.4 per cent). Hopes of a private equity bid for the group quickly fade.

British Airways 213.75p (down 2.75p, 1.3 per cent). Airlines suffer as the oil price continues to soar.

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