Sainsbury's makes play for loyalty

City Talk

On Wednesday, J Sainsbury reports full-year figures. While it may not merit headlines, the company today launches an enhanced incentive scheme on its Reward loyalty card. From a pounds 5 minimum threshold for shoppers, except OAPs and students, at its stores, the threshold will now be reduced to pounds 1 for everyone.

The debate on loyalty cards remains unresolved, but this latest move shows the stores group has no intention of relaxing in its attempts to promote its card in the fight for customers. Since the card was launched, Sainsbury's customers have clocked up a combined total of 2 million reward points.

Also posting full-year figures on the same day is Whitbread, the brewer to restaurants group.

Analyst Dermot Carr at stockbroker Nikko Europe is in buoyant mood over the group's prospects, following Labour's crushing victory.

He sees the introduction of a minimum wage as a boost for the company. By his reasoning, a minimum wage will mean more money going into the pub tills. Whitbread itself will not be hurt by a minimum wage, as it is generally deemed a good payer of its staff.

The company is also stronger in the south, where the economic boom is most powerful. That, coupled with good branding skills, makes the shares a buy, with an upside of 90p. He sees pre-tax profits coming in at pounds 319m (pounds 238m).

Still on the trail of analysts' words of wisdom, Beeson Gregory has produced its first note on Alizyme, the biotech company examining treatments for obesity. We recommended Alizyme as a smaller companies buy on 9 March, at a price of 37.5p. The shares now stand at 46.5p, but Beeson Gregory - admittedly the house broker - believes the shares trade at a minimum of a 55 per cent discount to their true worth. On a best-case scenario, the shares are worth three times more, argues analyst Alan Matthews. Take note, however, that further equity funding will probably be required within a 12-month period. Expensive beasts, these biotech start-ups.

Sterling's strength continues to hurt British exporters, but there was a brief flurry of activity among some of the most sterling-sensitive companies in the market on Friday. A wobbly pound on the foreign exchanges helped companies like British Steel advance 7.25p to 146.5p; Siebe, 19p, to 936.5p, and TI Group to climb 10p to 543.5p.

Siebe has been in trouble elsewhere recently; on Tuesday, the shares fell to an eight-month low, after talk it was about to fire its lead bank, NatWest. The rumour - Siebe refused to comment - came after NatWest Securities issued a sell note on the stock. It is said Siebe suggested it may want to review its relationship with the broker's parent. There are also rumours it may bid for Spirax-Sarco.

The biggest speculative tale of the week was APV, where the company confirmed it had been the subject of two bid approaches. The shares now stand at 94p, up from 66p on Tuesday. Observers believe the suitors may be German. There is also a belief in the market that bid activity will escalate again, once Labour has settled into office. Many deals are said to have been on hold in the run-up to the election.

As if to confirm such promise, engineer GKN went one better, and announced two days before the election its intention to launch a $570m (pounds 380m) offer for Sinter Metals of Ohio.

Celltech continues to have its fans, as the next British biotech wannabe, with stockbroker Henry Cooke, Lumsden very positive. It says the disappointment over the perceived failure of one of its products last year has led to a "wait and see" approach by the market. With the consequent slow-down in the share price, now is the time to buy.

An announcement by Glaxo Wellcome that it had a new treatment for septic shock was also greeted with dismay. Celltech is in the midst of phase three trials for its BAYX-1351 septic shock treatment. Even if the trials fail, which could see the shares fall to 400p, from 591.5p, they remain a buy, argues Henry Cooke, Lumsden. The company, it says, has a lot more in the pipeline.

RICHARD PHILLIPS