Market Report: US property boom fuels Ashtead renaissance

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The Independent Online

Shares in the tool hire specialist Ashtead continued their amazing renaissance yesterday, and if you believe the latest stock-market gossip they are likely to go further in the coming weeks.

Ashtead put on 2.25p to 105.75p, leaving its stock within a whisker of a four-year high, on talk that the group's forthcoming annual results are set to impress the City.

The company is said to have benefited from the booming US housebuilding market and the increase in demand triggered by the record four hurricanes that struck the US last autumn.

The bulk of the group's operations are across the Atlantic, leaving the group very exposed to fluctuations in the dollar exchange rate. However, the latest trend in the foreign exchange markets - which have seen the greenback appreciate in value against sterling - is great news for Ashtead and will help boost its profits.

Gossips reckon a fund raising could also accompany Ashtead's full-year figures, due next month. This is likely to be well-received by the Square Mile, given the company's strong trading at present. Any new money will without doubt be used by the company to reduce its borrowings.

Back in early 2003, Ashtead stood on the brink of collapse - its shares were worth just 3p - as tough market conditions and a heavy debt burden almost took the group under. But since then it has enjoyed a remarkable recovery, making it one of the best-performing stocks on the market for that time period.

Meanwhile, Steel Partners, the activist US fund manager, was said to be on the prowl. The fund, led by the Wall Street legend Warren Lichtenstein, was rumoured to be looking to add to its 3 per cent holding in Renold, unchanged at 52.5p, and to have started buying a stake in Carclo, 2p higher at 75.5p.

Both companies are as old economy as it gets, Renold makes industrial chains while Carclo makes engineering products, and so fit perfectly with Steel Partner's investment criteria which tends to focus companies with a strong asset backing.

Steel Partner's other investments in the UK include API, the packaging group, Delta, an engineer, and Lavendon, a tool hire company. The fund also has a history of prompting corporate action. Most recently, it has in effect put API up for sale after building a 29.9 per cent stake in the company.

Although the subsequent bid talks at API failed, most analysts expect the company to be taken over before the end of the year. The stock yesterday added 2.5p to 146.5p as dealers reported the presence of a buyer looking to pick up 1 million shares.

Brokers explained the 10p rise to 73p in the price of Homestyle as the result of a short position in the retailer being closed. The trader holding the bear position is said to have struggled to find stock to buy back and so forced the shares higher as he rushed cover his open position. Homestyle's future is now guaranteed after the South African household goods firm, Steinhoff, backed a £100m equity fund raising for the group.

Christian Salvesen, steady at 65.5p, saw David Fish, the chairman of the logistics group, disclose the purchase of 100,000 shares at 65.75p.

In the FTSE 100, which closed 15.1 points higher at 5,114.4, Scottish & Newcastle gained 4p to 472.75p on the back of an upgrade by Credit Suisse First Boston. The Swiss broker is convinced that S&N's top four brands are doing great business in the UK and is very bullish about the future of its BBH joint venture in Russia.

Meanwhile, Deutsche Bank got behind Northern Rock, up 19p to 808.5p, and HBOS, 12p higher to 872.5p. The German broker expects Northern Rock's market share to benefit from strong remortgage activity in the UK market and from any cut in interest rates, which it believes is increasingly likely given the latest noises coming from the Bank of England's Monetary Policy Committee. As for HBOS, Deutsche added the bank to its Pan-European Focus List, which comprises its favourite 16 stocks on the Continent. It believes the bank's shares should trade above 900p.

Nutrinnovator had its first day of dealings on AIM. The medical foods provider, which raised £3.8m at 5.6p via Arbuthnot Securities, saw its stock close at 6.25p. Nutrinnovator will use the new money to develop its pipeline of products, which includes Sirco, an innovative tomato drink.

Finally, Avesco dropped 1p to 99p on profit taking after solid annual figures from the group. Avesco posted pre-tax profits of £482,000, compared with a loss of £7.6m a year earlier. Investors should expect more positive news from the provider of support services to broadcasters in the coming months.

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