Market Report: Domino's delivers on bid talk and growth hopes

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The Independent Online

Bullish comments on its growth potential helped to drive Domino's Pizza up the mid-tier index yesterday, as market gossips cooked up a tasty takeover tale.

The pizza delivery company touched a peak of 468p during trading before closing 13.5p better off at 459p, amid vague rumours it may be in line for a private equity bid. With the group having climbed more than 20 per cent in the past month, the talk was that an offer could be in the region of 600p a share, but traders were largely doubtful, saying there were "better-value" companies out there.

Instead, its rise was put down to an encouraging "buy" note from Numis Securities' Douglas Jack, issued ahead of Domino's interim results, which are out on Monday. The analyst said that although there have been fears it will reveal a slowdown in like-for-like sales, any weakness was likely to be the result of a combination of the recent VAT increase and low spending on advertising, as well as the fact the figures were up against a tough comparative period.

"We believe the company is capable of generating around 15 per cent earnings growth in [the first half of the year] with minimal benefit from like-for-like sales, underlining the high quality of Domino's earning," said Mr Jack, who went on to predict the company could see its annual earnings grow by around 20 per cent on average over the next three years.

Overall, the FTSE 100 continued to bounce back from its sharp sell-off at the start of the week, shooting up 63.83 points to 5,853.82. As well as signs that Democrats and Republicans are getting closer to agreeing a raising of the US debt ceiling, the blue-chip index was also helped by the banks' strengthening ahead of today's key meeting between leaders on the eurozone debt crisis.

The news that Apple's quarterly profits had increased by nearly 125 per cent prompted ARM Holdings to shoot up 28.5p to 611p, meaning the Cambridge-based chip designer – whose technology is in a number of the US group's products – has added more than 8 per cent this week alone. Also helped on the readacross was its mid-tier peer Imagination Technologies, which climbed 38.6p to 419p as Numis Securities' Nick James changed his advice to "hold" from "reduce" and upgraded his royalty volume estimates.

Vague talk that Anadarko Petroleum is about to reveal a settlement with BP over the Gulf of Mexico tragedy pushed the energy giant up 11.4p to 472p, though reports emerged later in the day denying the chatter.

Man Group was also of interest to the rumour mill, as reheated bid gossip helped the world's largest listed hedge fund manager to power forwards 3.7p to 241.2p. JP Morgan was once again being linked with the group, as was Bank of America, with vague speculation saying a possible price could be between 350p and 400p a share.

The future of Reckitt Benckiser's pharmaceuticals business was in focus, with UniCredit predicting it would be either spun off or sold next year. The broker estimated the division was worth 330p a share, but went on to warn that operating forecasts for Reckitt's household, health and personal-care unit may be cut, and the company edged down 2p to 3,420p.

Meanwhile, there was a bitter pill for AstraZeneca to swallow late on Tuesday after the drugs company had its new diabetes product dapagliflozin rejected by the US Food and Drug Administration advisory panel. The group initially dipped in response, but ended up creeping forwards 14p to 3,032.5p ahead of another key judgment – set to be released after the bell – on its Brilinta heart drug.

Down on the FTSE 250, Misys raced up nearly 8 per cent, shifting 29.6p to 411p, following reports claiming the software group is close to striking a deal over being acquired by FIS. Discussions between the two were revealed last month, but Misys's share price has been knocked recently by fears the talks have ground to a halt.

The London Stock Exchange – another stock which has been in focus recently over a possible takeover – was lifted 33.5p to 1,030p following the release of its interim management statement. Seen as a potential target ever since its proposed tie-up with its Canadian peer TMX fell apart last month, the bourse – which said its first-quarter revenue had jumped up nearly 15 per cent – has been linked this week with potential approaches from both Hong Kong Exchanges and Clearing and the Stock Exchange of Singapore.

On the Alternative Investment Market, investors were taking a punt on Playtech as the gambling software group ticked up 30.25p to 368.75p. As well as releasing an update for the second quarter in which it said its revenues had risen almost 20 per cent, the company also revealed it had agreed to spend up to €23.8m on the mobile developer Mobenga and that it had signed a long-term contract with Gala Coral.