Market Report: Enterprise Inns takes fresh hit from brokers

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The Independent Online

Another round of negative broker comment bore down on Enterprise Inns, the pubs group which took the FTSE 100 wooden spoon yesterday.

The stock, which was hit by negative comment from Cazenove earlier this week, closed down 3.57 per cent, or 11.25p, at 303.5p after Credit Suisse initiated coverage with an "underperform" rating and Landsbanki switched its stance to "reduce" from "hold". Both brokers expressed concerns about earnings in the light of a deteriorating consumer environment, with Credit Suisse spotlighting the issue of debt.

Evros Constantinou, an analyst at Credit Suisse, said: "A decline in group Ebitda [earnings before interest, tax, depreciation and amortisation] below £465m (9 per cent below our 2009 tenanted Ebita estimate) would result in the comp-any breaching its bank debt covenants." He noted that such a decline looks "feasible on scenarios involving a combination of a considerable decline in beer sales and substantial tenant support".

In the wider sector, Marston's was down 3.25p at 196.25p after Landsbanki moved it to "hold" from "reduce". Elsewhere, in the banking sector, Bradford & Bingley fell behind its peers, easing back 1.25p to 49p, after positing interim results which in one analyst's assessment were "little short of appalling".

HBOS, which was the subject of rumours suggesting it has agreed to sell its Australian assets, gained 10.25p to 315.75p. The bank declined to comment on the speculation, and traders, mindful of the history of Friday afternoon rumours, remained sceptical. "It's vague and no one believes it – the shares are up with the rest of the sector," said one market source.

Overall, the FTSE 100 was up 35.4 points at 5,636.6 and the FTSE 250 gained 110.1 points to 9381.8. A resilient banking sector and resurgent resource stocks, which tracked strength in the price of oil, helped the senior index on the way to its highest level since the end of June. "Today's performance will leave many traders eyeing the 5,700 mark as the next objective for the FTSE," said David Jones, chief market strategist at IG Index.

Petrofac, which announ-ced the acquisition of Caltec yesterday, was the strongest on the London benchmark, up more than 5 per cent at 652.5p. The oil and gas services group drew strength from the spike in the price of oil, which rebounded as Tropical Storm Gustav threatened offshore energy production in the Gulf of Mexico. Wood Group, up 21.5p at 476.75p, and Cairn Energy, the India-focused oil and gas explorer and producer which climbed 121p to 2,978p, were also strong.

ITV advanced 1p to 44.8p, after new reports suggested that Bertelsmann, the European media group, was considering selling up to 15 per cent of its stake in the RTL television group to fund acquisitions. The news re-started the rumour mill around ITV, which has been the focus of bid talk over recent weeks as the market awaits the Competition Appeal Tribunal's decision on BSkyB's stake in the broadcaster. At the close, Sky was up 5.25p at 466p.

Fading bid talk, on the other hand, hurt RSA Insurance, which lost 3.3p to 150.8p. Recent rumours have hinted at a possible approach from Zurich Fin-ancial Services. But Cazenove, which weighed in on the speculation last night, said that while it would not discount the possibility, it would "be surprised if [the Swiss group] makes an offer at this time due to potential anti-trust issues in UK commercial".

Among the mid-caps, parts of the housing sector were strong after UBS revised target prices to reflect lower risks. The broker did, however, strike a note of caution. "Recent share price increases are a reflection of the removal of [the] extreme fear of backruptucy, in our opinion, but any fundamental performance is likely correlated to mortgage securitisation/ growth, which we believe is unlikely before mid-2009 at best," UBS said.

At the close, Barratt Dev-elopments, whose target price was increased to 157p, was up 5.57 per cent, or 7.75p, to 147p. Taylor Wimpey, whose target was upped to 57p, gained almost 2 per cent, or 1p, to 54.25p.

Also on the upside, Carpetright gained 2.72 per cent, or 18p, to 679.5p after Goldman Sachs raised its target price for the stock from 670p to 733p.

Among smaller companies, Oxford Biomedica lost 6.38 per cent, or 0.75p, to 11p after posting interim results and announcing the departure of its chief executive, Mike McDonald.

In response, Investec reiterated its "sell" rating for the stock. "We have always been of the view that Oxford Biomedica has more risk than any of its peers, at a similar stage of development, that we follow," the broker said. "This has been borne out in the recent phase III trial setback, which has precipitated a restructuring and potentially the exit of the chief executive as well."