Market Report: William Hill bounces back from law reform fears

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William Hill was back on traders' buy lists yesterday as a leading City brokerage Citigroup Smith Barney came out with a firm rejection of suggestions that the Government's reform of gaming legislation will have a negative impact on bookmakers.

William Hill was back on traders' buy lists yesterday as a leading City brokerage Citigroup Smith Barney came out with a firm rejection of suggestions that the Government's reform of gaming legislation will have a negative impact on bookmakers.

Shares in William Hill dropped 3 per cent on Monday as investors fretted that the group and its rivals face growing competition from Las Vegas-style leisure and gaming resorts, the likely product of the Government's reform package. But Citigroup disagrees. The broker believes reform will have little impact on bookmakers and argued that the Government's cautious approach might mean less competition as existing casinos face restrictions on the number of slot machines and a bar on unlimited payouts.

Hence, Citigroup moved its clients into William Hill, which ended the day 16.25p higher at 536.25p, and into Hilton Group, the owner of Ladbrokes, 0.75p better at 261.75p. The broker also warned that casino companies have a long wait before they can start to enjoy the benefits of the Government's deregulation of the industry, as the Bill is not expected to get its first reading in Parliament until the third quarter of the current year.

Meanwhile, the wider FTSE 100 enjoyed a rally after Monday's heavy losses and ended the session 25 points better at 4,458.6. The optimism was caused by better than expected consumer confidence data out of the US, where both the Dow Jones Industrial Average and the Nasdaq Composite achieved strong gains in early trading.

Rentokil Initial gave up 2p to 145p as Dresdner Kleinwort Wasserstein urged investors to use the recent strength in the company's stock price, on the back of takeover speculation, as a selling opportunity. Last week, stories of a break-up bid circled the Square Mile. But DKW is not so sure. "In terms of the break-up angle, we find it difficult to see how this would create value. Shedding some of the smaller operations would only leave the ailing businesses as a greater proportion of the whole," noted the broker. DKW predicts that the deterioration in Rentokil's business, which led to last month's profit warning, will take a long time to fix. It believes the group's interim results, on 26 August, will be extremely poor across all of the company's various operations.

Kesa Electricals dropped 4.75p to 296.25p as some in the market were unsettled by news of a contraction in French retail sales for May. Kesa owns Darty, France's biggest electricals retailer, and the data led to fears that sales at the division may be under pressure. But analysts were quick to note that the drop in retail sales across the Channel was very much to be expected. They noted that France has an exceptionally high number of bank holidays in May, a time when shops are closed.

Downbeat comments from Credit Suisse First Boston weighed on MFI Furniture. Shares in the retailer dropped 3.25p to 152.25p as the Swiss broker predicted that next month's interim results would reveal a 33 per cent drop in pre-tax profits. CSFB came to this conclusion after a briefing with the company. The broker said that MFI refused to comment on speculation that the company planned to demerge its Howden division or that the management was mulling a bid for the whole group.

Trafficmaster added 1.75p to 86.75p despite the sale of 50,000 shares at 85p by William McIntosh, a director at the navigation systems group. Hawtin, steady at 11p, disclosed that Philip Dovey, the company's former managing director, and Richard Morgan, its former finance director, had sold their entire shareholdings in the property group, which totalled 14 per cent of its issued share capital.

The logistics sector was set alight by news of a bid for Tibbett & Britten, up 94.5p at 584.5p. Christian Salvesen rose 3.5p to 57.25p, Wincanton added 14.5p to 227.5p, and Malcolm Group ticked 1p better to 81.5p. Torex Retail gained 2p to 61.5p after securing a contract to supply Big Food Group, the value food retailer, with its ePerformance product.

Countryside Properties dropped 5.5p to 216p on talk that business has slowed at the house builder. Some fear that the company may struggle to meet its earnings forecasts. Workspace rose 50p to an all-time high of 1,785p as gossips suggested that the property group is a prime takeover target. On Monday, the company issued an impressive set of full-year figures.

Bullion Resources closed unchanged at an all-time low of 3.25p, which is not good for shareholders, as the company floated at 40p back in 2002. But yesterday it emerged that Golden Prospect, the AIM-listed gold mining investment company, has recently more than doubled its holding to 11 million shares, or 23.9 per cent. Southern African Resources, the mining group chaired by Phil Edmonds, the former England cricketer, raised £2.8m via a placing with US institutional investors. Its shares marked time at 30.75p.

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