Market Report: Traders see reasons to stick with Home Retail

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The Independent Online

When GUS demerged and became Home Retail and Experian, most investors were more excited by the latter. After all, Home Retail is Argos and Homebase, two retail brands considered by many to be past their sell-by dates.

However, if the word in the market is right there could be plenty of reasons to stick with Home Retail, 8.25p firmer at 417.25p. Not only is there speculation that the company is poised to sign a joint venture deal that will see the Argos brand expanded into India, there is also talk that the private equity giants Kohlberg Kravis Roberts and Blackstone Group may be mulling an offer to take the company private. Traders are also betting that Home Retail had a decent Christmas, and expect a bullish statement next Wednesday. Experian closed 1.5p worse at 586p.

Investors are also banking on bid activity at InterContinental Hotels, with the US private hotel investment group Starwood Capital expected to bid 1,500p per share for the company. The shares surged in late deals, closing 35p firmer at 1,226p, as traders speculated that there could be a bidding war for the group.

Investors will hope that next week's trading update from Cairn Energy will spark a bit of life into the stock. The initial public offering of its Indian subsidiary was little short of a disaster as the shares tanked 14 per cent on their first day of trading. The shares closed another 26p weaker at 1,663p, more than 33 per cent worse than the 2,508p the shares peaked at in May last year.

Property stocks continued to give back many of the gains the sector has made since the majors converted to Real Estate Investment Trust status last week. Liberty International topped the list of blue-chip fallers, closing 35p worse at 1,295p, with Hammerson not far behind after a 12p fall to 1,492p.

In the wider market, the news that Lord Browne will leave BP earlier than expected dominated a quiet session. BP rallied 9.5p to close at 546.5p, helping the FTSE 100 climb into positive territory to close 8.9 better at 6,239.

Another takeover story doing the rounds involves Rank Group, the gaming and leisure operator. The word is that the US casino group MGM Mirage is running the rule over the company, a month after it offloaded the Hard Rock Café chain for $965m. However, some traders feel that there is little or no chance of a bid while a court case involving the sale of Hard Rock Café is ongoing. Rank closed 1.5p firmer at 225p.

The online gambling group PartyGaming, down 1p to 31.25p, slipped again following confirmation of widespread speculation that yesterday's big seller was the founding marketing director, Vikrant Bhargava. He sold 160 million shares through UBS, leaving him with 118.3 million shares. UBS also upped its target price for PartyGaming yesterday, from 27p to 36p, although the Swiss investment bank retained its "neutral" rating.

Companies and investors tend to want inclusion in the various indices - it gives the company an extra air of respectability as investment and tracker funds are forced to buy the shares to match market weightings. However for the property group Daejan Holdings, inclusion in the FTSE 250 has created a period of unprecedented volatility. The shares tanked again yesterday, closing 250p lower at 5250p. At this rate it may become the first company to specifically ask to be removed from index calculations.

The engineering group Charter was also out of favour following an unscheduled trading update. The brokers Panmure Gordon and Bridgewell Securities were both underwhelmed by the update as it comes on the back of three years of stunning performance by the company. Panmure cut its recommendation to "hold" from "buy" as the shares slid 37.5p to 871p.

Sports Café was also unloved as rumours did the rounds that takeover talks, confirmed by the company as long ago as September, could be called off. News that the talks are off would surprise few investors after Monday's poor trading statement, which revealed that full-year earnings will be below expectations. There was also talk of emergency fundraising at 15p per share, sending the stock 2p worse to 25.5p.

Finally, another small takeover rumour doing the rounds focused on Gulf Keys Petroleum, with small cap traders speculating about a 100p offer in the pipeline. The company has recently signed a deal in Algeria with BG Group, but some traders said that Gulf Keys may be too small for that particular suitor. The stock closed 3.25p firmer at 64.75p.