Market Report: UK Coal gets dusted off as a property play

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The Independent Online

One of the quieter stock market successes of the past three-and-a-half years has been UK Coal. What remains of the coal industry in Britain has given investors a return of more than 250 per cent since hitting a low of under 50p in late 2002, although some investors believe that the company's future is not in mining.

Yesterday's pre-close trading statement was roughly in line with analyst forecasts, with the group expecting to report a pre-tax profit of £7m. However, what traders were really interested in were changes in the major shareholders - US coal and the steel magnate Wilbur Ross have sold out, and two property tycoons have bought into it. Channel Island Hotels and Properties, run by David Kirch, now owns just over 3 per cent of the stock, and Peel Land and Property Investment, run by John Whittaker, now owns more than 5 per cent. Clearly, they are not investing in the company for its coal.

The analyst Charles Kernot of broker Seymour Pierce believes that UK Coal's property portfolio could be worth up to £500m if planning permission is given to a range of proposed developments, including leisure facilities and business parks. The group is currently worth half that amount, and, although a bid is not imminent, the group's new shareholders will want to influence where the company goes from here. The shares climbed 5.75p yesterday to close at 174.75p.

London shares enjoyed a strong day of trading as US shares opened sharply higher, with the Dow Jones 170 points better by the time the FTSE 100 index closed 96.3 better at 5778, with US traders buoyed by good earnings news from Coca-Cola and IBM.

After taking a pounding on Tuesday on the back of higher-than-expected start-up costs for home broadband, BSkyB bounced back as the brokers ABN Amro and SG Securities urged clients to buy the shares. SG upped its price target to 609p, while ABN increased its target to 630p, saying that forecast uncertainties were now reduced. Shares in BSkyB rallied 13.5p to close at 531p.

By the close, only three blue-chip stocks were in negative territory, with BP's North American woes continuing with the closure of 12 wells in Alaska on leak fears. Even so, the shares shed only 3.5p to close at 631p. Traders were in bullish mood after a depressing couple of weeks. BP was also helped by a steady first day of trading for the Russian oil giant Rosneft.

Sub-prime lender Kensington Group has had a volatile couple of weeks. Last Monday, the group shocked investors with a sharp rise in bad debt and arrears, but since then the stock has more than recovered and yesterday's news that the costly Home Condition Report (HCR) element of Home Information Packs will be voluntary sent the stock 74p better to 875p, the best performer in the FTSE 250. Analysts had been concerned the cost of Home Information Packs would reduce the number of homebuyers with poor credit records and would dent Kensington's business. The estate agency groups Rightmove and Countrywide took a hammering, crashing 71.25p to 280.75p and 28p to 397.75p respectively. Both had expected to benefit from the HCR element of the packs being compulsory.

After a week of selling pressure, buyers came back in to support the highly-rated microchip group CSR, sending the shares 91p better to 1,088p by mid-afternoon before a bout of profit- taking saw the shares close at 1,070p, a 73p gain. Rival Wolfson Microelectronics was also in demand, as traders took recent weakness as a buying opportunity, sending the shares 16p better by the close to 409p.

Traders are expecting interest to increase in a handful of small-cap stocks involved in domestic energy, after the Government confirmed private citizens as well as businesses might soon be able to trade carbon emissions. David Miliband, the Secretary of State for the Environment, said 44 per cent of emissions are from private consumers and rather than tax these emissions they could be traded. Investors said potential beneficiaries include Trading Emissions, 1.5p weaker at 123.5p, Ceres Power, 15.5p firmer at 270.5p and Ceramic Fuel Cells, 0.25p better at 26p.

So far, Dolly Parton's influence on the stock market has been limited, to say the least. Not so any longer, after the virtual queuing and reservations software group Lo-Q yesterday confirmed a deal with her theme park, Dollywood, which attracts more than 2 million country music and roller coaster fans a year. Although the current deal is on a trial basis only, market makers were quick to mark the shares higher. Itclosed at 14.75p, a gain of 2.75p.

Finally, institutional and corporate stockbroker Arden Partners braved choppy markets to raise £3m of new capital as its shares started trading on AIM. The shares were placed at 162p by the broker Altium Securities, and by the close had reached 172.5p, a 6.5 per cent premium.