Time to bale out as BAA fortunes dive

BAA; Gaming Internet; Xenova
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The foot-and-mouth epi-demic has undermined the fortunes of BAA, the world's biggest airport operator, according to figures released yesterday. The number of passengers passing through its seven UK airports rose just 1 per cent to 10.2m last month compared with April 2000.

The foot-and-mouth epi-demic has undermined the fortunes of BAA, the world's biggest airport operator, according to figures released yesterday. The number of passengers passing through its seven UK airports rose just 1 per cent to 10.2m last month compared with April 2000.

It was the second month in a row that BAA felt the effects of the disease as overseas tourists stayed away from the country. Heathrow, BAA's largest airport, proved the biggest casualty with passenger numbers down 3.6 per cent to 5.26m. Analysts believe the long-term effects of the foot and mouth outbreak on tourism in the UK remain far from clear. On the positive side demand for domestic flights is strong as the public increasingly takes to the skies to travel between UK cities rather than using the struggling rail network. Increased demand for cheap, no-frills travel to Europe has also benefited the group and helped Stansted increase passenger traffic by 21.5 per cent last month.

BAA's decision last week to appoint Mike Clasper as heir apparent to chief executive, Mike Hodgkinson, three years before he is due to retire should also be applauded. Analysts, however, see an uncertain future for BAA.

One of the biggest clouds hanging over the company is its controversial plan to build a fifth terminal at Heathrow. The outcome of a six-year planning inquiry is unlikely to be published before the general election next month. It will take BAA years to complete the terminal if it is approved. In the meantime, many Continental airports, such as Charles de Gaulle in Paris, are expanding capacity and attracting long-haul passengers from Heathrow, Europe's busiest airport which is suffering from severe overcrowding. BAA is also likely to be affected if the US economy continues its slide towards recession and Americans cut back on travel abroad.

BAA shares have risen 60 per cent to 601p yesterday after hitting a five year low of 355.5p in March last year. With annual results due on 4 June likely to be less than rosy following the foot-and-mouth outbreak and US slowdown, investors would be wise to sell.

Gaming Internet

Gaming Internet, the interactive betting group, has hit the ground running since its flotation in December 1999. The group has been busy securing media rights for gobarkingmad.com, its 'e-greyhound' business. It now has access to 100,000 races a year at 66 tracks worldwide, enough for an online event every five minutes. Most recently, it agreed a three-year contract to distribute content with Australia's Sky Channel.

Yesterday, the group confirmed that it is seeking to raise £12m through an institutional placing and open offer. If successful, the funds will be used to speed the development of gobarkingmad.com, which is due to launch on the internet later this month. The greyhound unit has also sealed a deal to set up an interactive television channel on Sky Digital. The platform is scheduled to launch in June and will feature live pictures from tracks around the world, including eight in Britain.

David Sanderson, GI's chief executive, said the financing should be enough to see the group through to profitability. The company's casino arm, which operates Harrods Casino Online, is already in operating profit. It will also benefit from the cash injection and is working with partners on a series of new ventures. Meanwhile, gobarking is expected to make a positive contribution in 12 to 15 months. GI's remaining activities include its SportsMAD site, a business-to-business operation that licenses easy-to-download games to outside companies. Mr Sanderson is not the only person to have spotted the potential to exploit the £5bn greyhound industry. Established rivals include the Greyhound Channel in the US and Britain's 24dogs.com, owned by Wembley plc.

There are no published forecasts available for Gaming Internet. But analysts at Merrill Lynch have attached a value of £125m to 24dogs. That compared with GI's market value of £50m at yesterday's closing price of 26.5p, up 0.75p. Like all internet investments, GI is a risky play. But following the recent run of positive newsflow and the promise of the gobarking.com launch, the shares are a buy.


Positive clinical trial data yesterday did little for shares in Xenova, the biotechnology company. Its most advanced treatment ­ XR9576 ­ successfully completed two trials of its ability to treat multidrug resistance in cancer patients. The chemical is close to entering the final testing stage before Xenova can seek regulatory approval.

The treatment, if it works, could address a significant market, with an estimated 90 per cent of cancer patients liable to develop resistance to the current generation of cancer drugs. The shares rose 1.5p to 57.5p yesterday and are worth a fraction of the 431p high of March 2000, when the price soared as investors hoped all biotechs could benefit from the mapping of the human genome.

The company, based in Slough, took over struggling rival Cantab Pharmaceuticals in March in a £62m deal that added potential treatments for herpes, cocaine addiction and nicotine dependence to its work on cancer. The integration is said to be going well, but the jury is still out on the rationale behind the merger. The takeover has widened Xenova's portfolio, but analysts are worried it will have difficulty integrating the companies, whose work involves very different technologies. It has just seven products in clinical trials and two in pre-clinical development. On average, one in 10 drugs in development reaches the market. Biotech shares should be bought only by those who can afford to lose their money. Even for takers of high risks, Xenova looks fully priced.