Market Report: Credit Suisse powers Kazakhmys to record high

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The Independent Online

A new note from Credit Suisse took Kazakhmys to a record high of 1,966p yesterday.

The broker raised its target price for the stock to 2,700p, citing the added value borne by the company's foray into power generation, and by its stake in Eurasian Natural Resources Corporation, its FTSE 100-listed compatriot.

"The group's foray into power through [the] acquisition of the Ekibastuz power plant and its associated Maikuben West coal mine earlier this year could prove a masterstroke going forward," the broker said. "The market took time to appreciate their 14.6 per cent holding in ENRC. Now it seems the market is also underestimating the recent acquisition..."

Credit Suisse said that, on top of its 1,880p-per- share valuation for the group's copper business, the new target price is based on the contribution of 220p per share from the power business and 600p per share from the ENRC stake.

Kazakhmys climbed 110p to 1,943p while ENRC rose 91p to 1,535p.

The remainder of the mining sector was also strong. Vedanta Resources fared the best, gaining 8.55 per cent or 219p to 2,780p, after Citigroup set a "buy" rating on the stock with a 3,061p target price. The broker also boosted Anglo American, which was moved to "buy" with a 4,000p target price and which rose 140p to 3,680p.

The miners and oil companies gave strength to the FTSE 100, which was up 72.2, or 1.2 per cent, to 6,376.5. Early gains on Wall Street also helped investor sentiment in London. The FTSE 250 rose 103, or 1 per cent, to 10,557.3.

The banking sector missed out on the market rally. Bradford & Bingley slumped by 15.79 per cent or 21p to 112p as market sources cited concern about the bad debts at the FTSE 250-listed lender, which unveiled a rights issue last week.

Royal Bank of Scotland, which went ex-rights last week, was down 10.5p at 256p as Goldman Sachs reduced its target price for the stock to 290p from 350p. Alliance & Leicester fell 10.75p to 430.25p, and HBOS was 6.75p weaker at 462.5p.

On the FTSE 100, two broker downgrades assailed British Airways, which claimed first place on the loser board, down 10.25p at 222.75p.

"A 10 per cent [earnings before interest and tax] margin puts BA's profitability ahead of peers, but looking forward it remains in the eye of stagflationary trends," said Deutsche Bank, switching its stance on the stock to "sell" from "buy". The broker also reduced its target price for BA, to 200p from 361p. ABN Amro also switched its stance to "sell", saying the stock's "recent rally in the face of rising oil prices" was "unjustified".

BSkyB, up 18p at 542p, was one of the few non-mining issues on the leader board after Deutsche Bank revised its rating on the stock to "buy" from "hold".

"Sky is trading at its lowest multiple ever, ahead of a period when EPS and cash-flow growth should be strong after a three-year investment phase," the broker said.

Bid speculation was evident around AstraZeneca, the pharmaceuticals group, which rose by 64p to 2,289p. According to the grapevine, Pfizer, the American drugs giant, was mulling a bid for the company. One trader played down the rumour, pointing out it is the latest in a series of sector consolidation scenarios mooted by market speculators – in the past, Pfizer has been linked to Shire, which has also been cast as a target for AstraZeneca. Shire closed up 31p at 886p.

On the FTSE 250, the animal genetics specialist Genus was the focus of renewed bid speculation. Last week, the company was said to be in the sights of Monsanto, the American agricultural biotechnology giant, but the talk bore no clues about the level of the prospective bid. Yesterday, while no names were mentioned, traders cited talk of a 1,300p-per-share proposal, which took the stock up by 20.5p to 888.5p.

Elsewhere, the battle to acquire the catering equipment maker Enodis heated up after Manitowoc, the US engineering group, returned with an increased cash offer of 294p per share for the company. Manitowoc's initial 260p-per-share bid was trumped by the US rival Illinois Tool Works, which offered 282p per share. Enodis, which intends to pay a dividend of 2p per share in lieu of an interim dividend in respect of the financial year ending 30 September 2008, was up 7p at 305p.

On AIM, Petrolatina Energy, the Colombia-focused oil and gas exploration and production company, was up 5.5p at 46p after Tribeca Oil & Gas, an investment company backed by the Colombian private equity firm Tribecapital Partners, invested $10m (£5.1m) in the company by way of convertible secured loan notes. The investment follows an earlier agreement between Petrolatina and Tribecapital, which plans to invest up to $25m in the company.

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