Market Report: Sinking GCap Media is rescued by rising tide

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The Independent Online

They say a rising tide lifts all boats. That was certainly the case with GCap Media yesterday. Shares in the radio group dropped sharply in early trading after a particularly bearish note from Deutsche Bank but managed to end the session marginally higher as soaraway gains by the wider market caused the stock to be marked up.

GCap Media, which closed up 1.75p at 191.25p, touched 183p at one point yesterday as Deutsche warned its clients that the radio group could see its earnings forecasts cut by 80 per cent over the next 12 months. The German broker said: "Declining audiences at GCap's stations are causing it to underperform a weak UK radio advertising market." It also warned of no clear signs that management's turnaround strategy is stabilising audience numbers.

The company's shares have lost a third of their value over the past year. Deutsche believes they have much further to fall. It set a price target of 145p and urged investors to abandon the company. "We welcome GCap's strategy to tackle its listener decline but there are few signs of success so far," the broker said.

The bearish words from Deutsche came just over a month after Merrill Lynch suggested that the radio group, which is due to put out a trading statement this week, could be in danger of breaching its banking covenants.

Elsewhere in the media sector, ITV jumped 3.5p to 100.25p on fresh hopes of a private-equity bid for the broadcaster. Just under 50 million ITV shares changed hands, higher than on a normal day.

Emap rose 19p to 741p, helped by an upgrade from Goldman Sachs. The US broker raised its recommendation on the publisher and radio group to "buy" from "neutral" and argued that further cost savings could act as a catalyst for a jump in the stock. Goldman also suggested that a sale by Emap of its business-to-business operation, which includes publications such as Middle East Economic Digest and Nursing Times, could be on the way.

BSkyB was not so lucky. Shares in the satellite broadcaster gave up 7p to 543p on rumours the company had urged one City analyst to cut his earnings forecasts for the current year. The only other blue-chip fallers yesterday were Enterprise Inns, down 5p to 1,051p, Icap, off 2p to 507p, and Northern Rock, down 2p to 1,168p. The FTSE 100 roared 75.3 points higher to 5,873.6; the FTSE 250 gained 89 points to 9,844.9.

Hanson, 42.5p higher at 730p, was the best blue-chip performer thanks to ongoing speculation that the building materials group will soon be taken over by a larger rival. There were, however, some cautious comments from Deutsche Bank. It sees several obstacles to Hanson being bought, including the company's significant asbestos liabilities and its high exposure to the US, where the housing market is suffering a faster-than-expected slowdown. BBA ticked 3.5p better to 258.5p amid vague rumours of a management buyout bid for the aviation services to non-woven fabrics group.

Sentiment towards the mining sector was boosted by comments from Cazenove. The heavyweight broker argued that valuations in the sector already factor in a collapse in commodity prices. Despite recent share buy-backs by some of the sector's biggest players, Cazenove believes the industry still has enormous potential to return cash to shareholders. BHP Billiton rose 38p to 891p, Anglo American added 82p to 2,142p, Xstrata improved 74p to 2,110p and Rio Tinto put on 82p to 2,434p. Hopes that Corus will soon merge with a major developing country steel maker pushed its stock 13.25p better to 377.25p.

New Star Asset Management fell 3p to 400p after directors, staff and certain former employees sold a 3.8 per cent stake in the fund manager. Citigroup handled the placing of just over 11 million shares at 384p. John Duffield, who founded New Star and remains its executive chairman, did not participate in the sale. Among employees who did cash in their chips was Mark Skinner, the AIM group's marketing director, who raised nearly £1.2m.

Forum Energy was the best performer on the market yesterday. Its stock soared 105 per cent, or 72p, to 140.5p, on news of a 3.4 trillion cubic feet gas discovery in the Philippines. Alongside a portfolio of oil and gas assets, Forum also operates a coal mine in the south-east Asian country.

Finally, Pixology jumped 6.5p to 33.5p as Eurovestech, the AIM-listed investment group, doubled its stake in the company to 7 per cent.

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