Market Report: Strong results spark interest in Northern Rock

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The Independent Online

Northern Rock is never likely to figure prominently in a guide to sexy stocks. The Newcastle-based mortgage bank still does most of its business through the Royal Mail and tends to remain firmly in the shadow of its retail banking peers, never mind its investment banking peers, most of whom would be horrified at being mentioned in the same sentence. But it must be doing something right; full-year results yesterday were well ahead of expectations and analysts spent most of the day falling over each other to heap praise on Northern Rock.

Deutsche Bank was one of several brokers impressed with the results. In a note to clients yesterday it said: "We believe a growth strategy based on market-share gains in the relatively low-risk residential mortgage market is attractive. We retain our long-term positive view of the stock."

The heavyweight US broker Goldman Sachs also advised clients to buy, saying under current management earnings per share could double in four years rather than five. The shares rallied 33.5p to 1,014.5p.

Speaking of unglamorous businesses, BOC has hardly been out of the headlines in the past couple of days after confirming on Monday that the German rival Linde had submitted an unsolicited bid for it.

The US investment bank Citigroup says Linde could generate synergies that could justify a bid at 1,580p, and a bid at that level would have to be given serious consideration by BOC's board and shareholders. It also recommends that BOC investors demand compensation should the deal fail to pass muster with European competition regulators.

BOC shareholders could be forgiven for taking their profits; they have been here before. A bid from rivals Air Liquide, a French gases group, and Air Products, a US peer, fell apart in 1999 after regulators decided a merger between the three was bad for competition. Traders are betting that a block on a deal is unlikely; the shares gained 5p to close at 1,460p.

Wednesday's talk was that sellers of BOC were switching into tobacco stocks but all succumbed to a bout of profit-taking yesterday. Gallaher fell 21p to finish at 867p, with Imperial Tobacco and BAT following suit. Imperial was down 34 to 1,633p, and BAT lost 14p to close at 1,260p.

Icap, the world's largest interdealer broker, confirmed it is in talks to buy the currency trading firm ESB from a consortium of investment banks, in a deal expected to valued ESB at $700m (£390m).

Traders are not afraid to support their mates and as a result Icap shares were up to 422.75p, a rise of 33p, making it the biggest gainer in the FTSE 250. One trader said: "This is exactly the sort of deal Icap has been looking to do for a while, and ESB has always been its preferred target. It is a good strategic fit and should be earnings enhancing immediately, so long as the price tag does not get out of control."

Elsewhere in the mid-market, first-half results from the specialist machine tool and measuring device maker Renishaw failed to impress despite a pre-tax profit rise of 23.5 per cent on the same period last year. Brokers had been looking for £15.5m-£16m and the shares fell 25.5p to 868p. Even so the stock has risen nearly 300 per cent since January 2003.

The motoring giant Saab may have given up its titanium mining prospects in north Sweden, but Beowulf Mining has not. It announ- ced yesterday it had registered a mining permit with the Swedish government to explore the Ruoutevare, an area known as a large titanium deposit since the 18th century. With commodity stocks remaining in focus, the stock rose up 0.75p to close on 5.87p.

Max Petroleum was among the leading gainers in the small caps, rising 10.75p to close at 137.5p on heavy volume of 7.5 million shares, giving it a market capitalisation of £377m. Its reserves in western Kazhakstan, acquired on 12 January for $43.5m, are reported to contain the equivalent of 1.25 billion barrels of oil. Its neighbour Primorieneftegaz was bought yesterday by the Russian giant Lukoil for $250m. Primorieneftegaz had proven reserves of 300 million barrels, leading traders to believe Max Petroleum's potential reserves are being discounted by the market.

Its fellow oil exploration and production minnow Cambrian Oil & Gas was also traded heavily, with 7.9 million shares changing hands. It rose 55 per cent to close at 6p, the largest riser in the small caps.

The intellectual property developer Angle fell 7p to 84.5p. It dispensed with the services of the broker KBC Peel Hunt on Monday and traders said Peel Hunt was getting rid of the last Angle stock on its books, leading to a large line of stock dragging down the price.

Hornby, the model railways maker, rose 13.5p to 191.5p. Its new products have been greeted warmly at the London Toy Fair.

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