Market Report: UBS saves Big Food Group from day of chaos

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The Independent Online

On a day of turmoil for stocks on both sides of the Atlantic, Big Food Group managed to end the session in positive territory and it was all thanks to a bullish research note from UBS. BFG put on 2p to 112p as the Swiss broker tipped the convenience store operator to achieve a 34 per cent jump in profits for the year to March 2004, which would indicate that the group's recovery is on track.

On a day of turmoil for stocks on both sides of the Atlantic, Big Food Group managed to end the session in positive territory and it was all thanks to a bullish research note from UBS. BFG put on 2p to 112p as the Swiss broker tipped the convenience store operator to achieve a 34 per cent jump in profits for the year to March 2004, which would indicate that the group's recovery is on track.

Although UBS has had to trim its BFG earnings forecasts for 2005 due to greater competition in the sector following the merger of Morrisons and Safeway, the broker still anticipates growth from the company's core Iceland division as management tightens costs and improves buying.

BFG shares underperformed the FTSE 100 by 18 per cent last month and by 40 per cent in the last quarter. One of the main reasons for this is speculation that Baugur may be looking to sell down its 22 per cent stake in the company. It is BFG's biggest shareholder. Worries about at a slowdown in sales at Iceland stores have also taken their toll. But UBS believes BFG shares have fallen far enough and so upgraded its recommendation to "buy" from "neutral" and set a 150p price target.

Meanwhile, the FTSE 100 index dropped more than 38 points to 4,403, having traded as low as 4,360 at one point during the day, as nervousness about high oil prices and continuing violence in the Middle East hit equities hard. Enterprise Inns dropped 15p to 560p while Punch Taverns retreated 13p to 472.5p after Investec Securities warned that the reputations of pub duo could suffer as a result of the government probe into the relationship between pub landlords and tenants.

Standard Chartered lost 20p to 840p amid concerns about the emerging market-focused bank's exposure to India. The country's stock exchange suffered its biggest ever crash yesterday as investors fretted about the economic programme of the incoming government led by Sonia Gandhi. Mrs Gandhi, the wife of former Indian prime minister Rajiv Gandhi, is likely to require the support of the country's communist party if she is to be able form a government. Standard Chartered generated about 12 per cent of its profits from India last year and the country accounts for roughly 5 per cent of its asset base.

Credit Suisse First Boston did no favours for LogicaCMG, down 13.75 to 190p, ahead of the IT group's trading statement today. The Swiss broker urged investors to reduce their exposure to the stock, telling them that a lot of uncertainty surrounds the company's profitability this year. It sent a 190p price target on the shares. As it stands, the market is expecting 2004 herald a return to growth at LogicaCMG.

British Energy gained 0.10p to 11.55p on talk that European regulators and the government are close to an agreement on a £1.5bn bailout of the stricken electricity generator. In 2002 the government agreed to lend BE some £650m and assume some of the company's liabilities. Approval for the loan from European regulators would take BE one step closer to completing its debt-for-equity restructuring. Market professionals calculate that the successful completion of the deal would leave BE's current shares worth between 15p and 20p.

Bulls of Bioprogress have had a terrible time over the past two months. Shares in the maker of capsules for the pharmaceuticals industry peaked in March at around the 140p level but have been on a downward trajectory since. Bulls yesterday desperately tried to give the stock a boost by suggesting that the group had received an informal bid approach from the US-based International Speciality Products. Bioprogress has in the past been linked with ISP.

But sources close to the company played down the significance of such a move. They argued that Bioprogress regularly receives informal offers from larger players, offers which in the past it has always knocked back. The company is believed to have done exactly this with ISP's latest suggestion. And so shares in the capsules group continued their decent, falling 11p to 74.5p.

Trans-Siberian Gold had a better day. It rose 3.5p to 122p as investors moved into the Russia-focused explorer ahead of its full-year results today. Word has it the group's statement will make pleasant reading for shareholders. And investors can expect further bullish news from Trans-Siberian tomorrow. According to one well-informed corner of the Square Mile, the group is set to issue new drilling data ahead of a meeting with a group of City mining analysts. Trans-Siberian raised £16m last year via its AIM float and is using the cash to develop two major gold-mining projects in Russia.

Finally, punters should keep an eye on Network Limited, the outdoor advertising specialist. Its shares ran up 3p to 9.5p on word that the group close to securing the disposal of a legacy biotech asset.

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