MARKET REPORT : Railtrack heads a charge of the blue-chip brigade

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The Independent Online
Railtrack, the much derided and last of the major privatisations, led the blue-chip charge as the stock market seized upon an upbeat New York display.

The shares, floated at 190p last spring, were again on the express line, gaining 20.5p to 457p in brisk trading.

The railway company's strength was the latest example of the market's indifference to the possibility of any strained relationship between a Labour government and the nationalised industries.

At the last election the former state-owned groups were like puppets on the opinion poll string - rising or falling with every twitch in the opinion reading.

This time round the privatised groups are romping ahead. They have thrown off the feared shackles of Labour domination with the market convinced, perhaps rather naively, the windfall tax will not be too fierce and, anyway, it is already discounted in the share prices.

It is also bravely taking the view the regulatory climate will not get any worse and dividend growth will not be hindered.

It will be interesting to see if such a wide-eyed approach survives for long if the Tory Government is toppled.

Still, such restrained thoughts played no part in Railtrack's storming display. Speculation remained about the group's property assets and its ability to realise its hidden wealth. The shares, it is calculated, are selling on six-times cash flow. Talk of some corporate activity is another influence. The partly paid shares have, however, still to reclaim their peak, hit earlier this year.

The market in general was in no mood to worry about any changes after polling day. Higher interest rates, perhaps by a full point, and the distinct likelihood of higher taxes were swept aside as Footsie romped ahead 35.1 points to 4,286.8.

Utilities remained flavour of the month and BG's remarkable revival continued with a further 1.5p gain to 187p.

SBC Warburg contributed to the privatisation party. The securities house set new targets for British Airways and BAA. It sees BA flying at 750p, a thought which enticed the shares 15.5p higher to 665p. BAA, the old British Airports Authority, rose 7p to 516.5p with Warburg talking of a 600p price.

The leading brewers got into a ferment as Dresdner Kleinwort Benson said buy Whitbread and sell Scottish & Newcastle. MeesPierson chipped in with a buy for Whitbread, looking more at its eating out facilities than brewing presence. Whitbread responded to the dual support with a modest 2.5p gain to 770.5p; Scottish blissfully ignored the Kleinwort caution, foaming 8.5p higher to 649.5p.

Gibbs Mew, the modest Salisbury-based brewer, put on 8.5p to 272.5p (after 286.5p) on suggestions its recovery potential had been overlooked.

Retailers were generally firm although DFS, the furniture chain created by Sir Graham Kirkham, fell 22p to 503.5p. The shares have come down from 651.5p this year, largely on worries growth is slowing.

Granada, with Lehman Brothers suggesting a 1,000p level, rose 9.5p to 875p; EMI recovered a further 30.5p to 1,185.5p, largely on US influences. RTZ, the mining group, managed a 10p gain to 954.5p as some large deals were recorded.

Shield Diagnostic, on the UBS presentation, improved 12.5p to 620p; Smith & Nephew's treatment for foot ulcers produced a 3p gain to 181.5p and a Chiroscience system for moving side effects from drugs lifted the price 14.5p to 380.5p.

Optometrics, the small optical equipment group, scored the day's outstanding gain, up 105 per cent to 22.5p. A consortium, featuring Leeds solicitor Peter Levine, is buying a 53 per cent stake from directors at 16.5p. The guess is Optometrics is destined for the role of a shell with a rights issue and reverse takeover likely in the next few months. Mr Levine is a director of Severfield-Reeve, the engineering group.

Ask Central, the restaurant chain run by the Kaye family (of Golden Egg and Garfunkels fame) held at 200p after producing its second cash call in five months. The group has opened 20 restaurants since floating in September, 1995, and is due to launch another three. It is raising pounds 5.3m on a one-for-five ration at 160p. Last year's placing pulled in pounds 1.25m at 100p. The shares have been down to 58.5p.

Freeport Leisure, running out-of-town shopping facilities, gained 11.5p to 136.5p. Some pointed to the MEPC\C&G Clark factory shops deal as offering a new basis for pricing Freeport; their calculation came to a remarkable 600p a share.

Taking Stock

r Watermark, a marketing specialist, jumped 6p to a 34p peak following profits of pounds 653,000 against a pounds 60,000 loss. Stockbroker Durlacher calculates pounds 1m will be pulled in this year. But it is ignoring any possible contribution from a deal to manage the Miss World Contest, the old Eric Morley parade which is being held in the Seychelles in November and still has a big world-wide following. Miss World came in for heavy criticism in this country but John Caulcutt, Watermark's chairman, said: "It will be presented in a different and refreshing way compared with what went before." The shares were floated at 13p.

Maid, the on-line information group, should make profits of pounds 10.1m this year and pounds 17.7m next. Merrill Lynch says buy. The shares are 234.5p.