Market Report: BT receives unfavourable signals from an analyst

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CARR Kitcat & Aitken has dialled the wrong numbers for the British Telecommunications giant. As the heavily hyped pounds 5bn-plus government sale edges towards its close the stockbroker described the existing BT shares as 'overvalued'.

Analyst Christopher Tucker has sharply reduced his profit estimates and is largely responsible for BT shares falling to 413p, an 11.5p fall since Carr started ringing round with his comments on Friday.

He has lowered this year's profit estimate by pounds 520m to pounds 2.73bn and the following year's by pounds 650m to pounds 2.9bn. His revised figures put him below the forecasts of his rivals. The consensus view for this year is pounds 3.08bn and for next pounds 3.28bn.

Carr is one of the few leading investment houses not involved in the BT share sale, and is therefore able to offer its views on the group and its shares.

Mr Tucker says he has become increasingly cautious about BT following its latest results, a 'downbeat' BT3 prospectus and ominous regulatory developments.

He believes the 'increasingly difficult regulatory environment' will make it difficult for the group to average more than 7 per cent earnings per share growth in the mid-1990s and dividend growth will lag behind other utilties at 8 per cent.

'We believe the stock market has not yet comprehended the full extent of the changed outlook for BT,' he says and suggests a price around 380p would be more realistic.

The BT public offer closes tomorrow with the international tender on Friday. Dealings in the new shares are due to start on Tuesday.

The rest of the stock market, struggling under the BT3 shadow, endured another subdued session with falls throughout the list and the two leading indices giving ground. But trading was pathetically thin, with turnover failing to reach 450 million shares.

Government stocks for once stole the show, scoring gains of up to half a point. They were inspired by the encouraging inflation news and hopes of more European interest rate cuts.

Among equities, newspaper and television shares had particularly difficult sessions. The summer price 'war', so far confined to the tabloids, stripped 14p to 153p from Mirror Group Newspapers, clearly reducing prospects of the Maxwell private company administrator going through with the hoped-for autumn sale.

United Newspapers, in the throes of a pounds 190m rights issue, dropped 7p to 535p and Daily Mail Trust more than 150p to pounds 99. News International shaded 1p to 215p.

TV shares were ruffled by indications that Peter Brooke, National Heritage Secretary, had rejected proposals for a takeover free-for-all.

The sector has scored strong progress this year as the feeling has grown that Mr Brooke intended to throw the takeover shackles aside. Anticipating such a move Granada Group snapped up more than 20 per cent of the preferred shares of LWT (Holdings).

Granada fell 4p to 407p and LWT 12p to 458p. Among others lowered were Anglia, 15p to 320p, Central Independent, 52p to 1,978p, and Yorkshire-Tyne Tees Television Holdings, 8p to 196p.

British Aerospace rose 15p to 420p as hopes returned that the protracted Saudi Arabian order is at last about to be clinched and on the optimistic comments on the Rover car offshoot, where sales are up 13 per cent.

Rolls-Royce was dragged 5.5p higher to 142.5p in the BAe slipstream.

Kingfisher suffered from its French connection, falling 11p to 589p. Darty, its recently acquired cross-Channel electrical retailer, reported disappointing first nine months sales and observers feel there would appear to be little prospects of any sharp improvement with the French economy continuing to deteriorate.

Container leasing group Tiphook lost another 14p to 274p ahead of tomorrow's anxiously awaited figures. But Spring Ram Corporation, the bathroom and kitchen group, gained 5.5p to 54p on the signalled boardroom changes.

Food retailers remained depressed, with the 'overcapacity' comments still creating anxiety. J Sainsbury, possibly the most bullish of the supermarket leaders, fell 9p to 434p.

Kwik Save, off 16p at 691p, had another poor session despite more evidence of the attachment of Dairy Farm. The Hong Kong group has picked up another 600,000 shares, nudging its stake to 29.3 per cent.

The surprise is that it has not, with Kwik Save shares so weak, moved to the takeover ceiling of 29.99 per cent. Even so, Dairy Farm is expected eventually to bid for full control.

Kwik Save has come down from 853p this year and lost its FT-SE 100 index status in June.

Commercial Union fell 11p to 604p on worries about the impact of the US floods. General Accident lost 8p to 613p.

Water shares were generally firm ahead of today's report by Ofwat, the industry watchdog. But Welsh Water, with the added anxiety of results on Thursday, fell 9p to 566p.

Electricities lost some of last week's exuberance, turning in a mixed performance.

Shares retreated. The FT-SE 100 index lost 12.3 points to 2,830.9 and the FT-SE 250 index 8.2 points to 3,228.6. Volume was only 448.1 million shares with 26,182 bargains. The account ends on Friday with settlement on 26 July.

Boddington Group, the pub chain, has wasted no time cashing in its chips at J A Devenish. It sold its near-20 per cent interest, legacy of an unsuccessful bid, in the market through Cazenove at 360p, netting a profit of about pounds 15m. Devenish is being taken over by Greenalls Group, creating a 2,000-pub chain. Boddies, unchanged at 277p, had said it would sell or accept the 356.5p cash alternative.

Amberley, the building preservation group, came to life on the restricted alternative market. The shares rose 8p to 43p as some speculators banked on corporate activity. In March, Brian Meddings, ex- BPB, and Robert Healey, ex-ADT, joined the board and took a 27.28 per cent stake. Unquoted stone group Peter Cox has 29.9 per cent and is thought to see Amberley as a way to market.

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