Market Report: Russian U-turn on beer lifts Scottish & Newcastle

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The Independent Online


Trying to predict political developments in Russia is a tricky business and those investors trading Scottish & Newcastle stock over the past week can certainly testify to that. On Friday, there was a rush to exit S&N amid fears that drinking beer in outdoor places was about to be banned in Russia but yesterday they returned to the brewer as the country's upper house surprised analysts and vetoed a ban.

The concerns about outdoor drinking in Russia were raised by ABN Amro on Friday and followed a unanimous move by the country's Duma, or lower house of parliament, to outlaw the practice. In fact so worried was ABN about such a scenario, that it advised investors to sell S&N shares fearing that the new law could seriously hamper growth in the beer market. It estimates that between 20 and 30 per cent of all Russian beer is consumed in the public arena.

That part of the world is very important to growth at S&N, which is up against falling beer consumption in the West. But it seems that ABN need not have panicked as Russia's upper house of parliament put the kibosh on the bill, which sought to limit beer drinking to pubs, restaurants and homes. The chamber is now reported to be looking at ways of amending the proposed law. Not surprisingly investors were cheered by the news, sending S&N shares 3.25p higher to 419p.

Meanwhile, the FTSE 100 rose 16 points to 4,734, with Antofagasta, 40p better at 1,082, ICI, 7.5p higher at 224.75p and Compass, 8p stronger to 245.75p, among the best performers. Vague talk of a management buyout boosted Luminar, which went 13.5p better to 497.25p. The nightclubs operator has been on the receiving end of a number of broker upgrades in recent weeks.

Corus rose 2p to 53.5p after it was announced that the steel maker would replace Abbey National in the FTSE 100.

Big Food Group rallied 0.5p to 92.25p despite a warning from Numis Securities that the retailer's interim results today are unlikely to make pleasant reading. It seems that the main thing holding BFG's share price up at present is the hope that Baugur will buy the company. But should the deal collapse, Numis believes the stock could easily slump to the 50p to 60p level.

Citigroup raised its stance on London Stock Exchange to "hold" from "sell" ahead of today's interim results from the bourse. The broker believes that continued bid speculation will help support the LSE's valuation in the near term and also raised the possibility of a special dividend to shareholders next year. At present, LSE shares trade at a 14 per cent premium to Deutsche Börse, which is widely seen as a likely bidder for the group, but at a 17 per cent discount to Euronext. In terms of the upcoming figures, analysts expect LSE to post a mere 2 per cent rise in pre-tax profits to £45.5m.

Elsewhere, ABN Amro undermined sentiment towards house builders. "We now see a hard landing as a real possibility in the UK housing market", the broker said after slashing its forecasts for earnings in the sector by 14 per cent for 2005 and 20 per cent for 2006. Bovis Homes fell 2p to 516p, Crest Nicholson lost 0.25p to 336.75p, Countryside Properties lost 3p to 266.5p and McCarthy & Stone lost 13.5p to 582p.

Brokers talked of a strong debut from Europa Oil & Gas today. The explorer, which focuses on Greece, will raise £5m at 25p a share. In the building materials arena, Cape was unchanged at 142.5p despite rumours of bullish trading at the company. Shares in Cape stand at an all-time high. Proteome Sciences added 4p to 75p as the biotech made a series of well received presentations to institutional investors.

API jumped 5p to 97.5p with dealers reporting continued demand for the stock from the United States hedge fund Steel Partners. At the last count, it controlled 15 per cent of the company. Healthcare Enterprise ticked 0.03p better to 1.99p after signing a manufacturing deal for its endoscope product. Word has it more positive news flow is on the way in the coming months.

Finally, investors would do well to keep and eye on Lodore Resources today. The group is expected to float on AIM as a cash shell and brokers are predicting lively trade in its shares. Lodore hopes to raise about £1.4m at 5p a share and will use the money to fund an acquisition in the oil and gas production arena, possibly in the US.

After the float, the Monaco-based businessman Andrew Regan will have a 28 per cent stake in Lodore, via his Corvus Capital vehicle. Mr Regan marked his return to the City back in September after being cleared of any wrongdoing in the Co-op scandal case. He bought a 45 per cent stake in Corvus, which he plans to use as an investment vehicle.

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