Market Report: Vietnamese prospects boost Soco International

Click to follow
The Independent Online

Sometimes markets are a bit slow to focus on good news, although the same can rarely be said for bad news.

A delayed response from traders over upbeat comments and results from the oil exploration and production company, Soco International, on Thursday helped its shares climb 54.5p yesterday to 904.5p, making it the best performer in the FTSE 350.

Traders expect to hear more good news from the company next week as Soco will give an update on a final drilling test on its operations offshoreVietnam.

The brokers Bridgewell Securities and Seymour Pierce published bullish notes after initial test results that led management to tell institutional investors the Cuu Long Delta well could hold2.5 billion barrels of recoverable reserves. Bridgewell saidthe company's pipeline of drilling programmes "has the potential to generate significant upside, and the next couple of wells could add more than 100p to our sum-of-the-parts valuation".

Thursday's results were excellent. The company reported a 125 per cent increase in pre-tax profits to $33m (£19m), with cash reserves hitting $53m, mainly from its operation in Yemen.

Takeover chatter continued to drive the markets higher, but, typically for a Friday, most of the stories were a rehash of secondhand rumours. Lloyds TSB was 4.5p better at 535.25p, as reports indicated UBS had been appointed adviser by one of the big Spanish banks, leading traders to conclude that the long-awaited bid would come soon. Shares in Rolls-Royce, 5.75p better at 447p, were also well bid on stories that the US engine manufacturer General Dynamics was preparing a bid. Having heard the same stories time and again most dealers did not take them too seriously.

In the past four weeks 38 FTSE 100 companies have been the subject of takeover or corporate activity-related rumours. Private-equity companies are flush with cash, and while there is no doubt some deals will happen it is also fair to assume most won't. One trader said: "Even if you don't believe most of the stories no one wants to be first out of the door - and certainly it is not a market to be short in."

It was a relatively quiet day for the FTSE 100 as it limped towards the weekend, spending most of the day up by single digits. But a late rally after a strong opening for the Dow Jones saw the index close 52 points higher to end the week at 5,907.9.

AstraZeneca continued its good recent run, rising 39p to 2,870p, testing multi-year highs despite most analysts dismissing talk of a 4,000p bid from Novartis as being too rich. Traders noted that buyers were paying high prices for the March 3,100p calls in the options market, indicating that even if a bid did not come at 4,000p it could still be at a decent premium to AZ'smarket price.

Traders will be watching for increased volatility in Qinetiq next week. The controversy surrounding the sale of the UK's leading defence research agency seems to have died down, with its shares doing next to nothing since coming to the market a month ago. But that may change when the stabilising period ends on Monday. Stabilising is when an agency, usually an investment bank, supports shares in the immediate aftermath of a flotation to try to make sure the share price remains steady. Qinetiq shares rose half a penny to 200p.

Shares in Future Internet Technologies retreated 5p to 45p as dealers reacted badly to the emergence of Robert Bonnier as its chief executive. Mr Bonnier has been fined for market abuse in the past. The company also announced the purchase of a 49 per cent stake in the Belgian communications application provider Aquanta for an initial €1.5m (£1m).

Another takeover saga took a widely anticipated turn as Permira, the private-equity house, upped its offer for the DVD and CD retailer HMV Group to 210p. Dealers are not giving the bid much hope of success as itssharesmanaged only a meagre 3.25p gain to 195.25p, 14.75p below the offer.

The property fund manager and developer Teesland was a penny better at 95.25p, as the director John Sims sold 3.5 million shares, a little less than half of his holding. Dealers reported strong demand for Teesland stock, and the sale was heavily oversubscribed. The company gave no reasons for the sale.

Shares in Carphone Warehouse were 1.75p weaker as Credit Suisse began placing 5.5 million shares in the mobile telephone retailer on behalf of an unnamed institutional investor.

The disaster of the day was Greggs, which slid after the baker warned on 2006 earnings. Greggs blamed rising energy costs and less buoyant consumer spending as it told the market its profits would be "materially below" 2005 numbers. Its shares fell 545p to 4,058p.