Market Report: Scottish independence hopes fire Babcock higher

  • @greentoby

When Scotland goes to the polls, don't be surprised to see Babcock International cheering on Alex Salmond. If the leader of the Scottish National Party gets his way and breaks up the union, then – according to City scribblers – the defence group could be one of the beneficiaries.

North of the border, Babcock runs the Faslane base, which is home to the Trident submarines, for the Royal Navy while its Rosyth dockyard is currently building the Queen Elizabeth aircraft carriers.

As a result, said Canaccord Genuity's Michael Donnelly, a possible shake-up of the armed forces' presence in Scotland if it gains independence "could provide an opportunity" for the company. Notably, one of Mr Salmond's major aims is to remove Trident from Scottish waters, and the analyst noted the potential for Babcock from such a decision given "the complexity and time involved in potentially re-locating nuclear and submarine facilities".

Mr Donnelly was bullish on the group generally, keeping his "buy" rating and raising its target price to 900p. After a meeting with its top brass, he said they remained "strongly positive" on its core UK defence engineering services market, and investors responded by pushing Babcock up 13p to 753.5p.

Overall, the FTSE 100 edged 12.36 points higher to 5,927.91 after a mixed run of economic news from the States, with poor durable goods data cancelled out by encouraging consumer confidence figures.

Investors were largely happy to keep their hands in their pockets ahead of today's second-round of cheap loans from the European Central Bank, although the prospect did give metal prices a push. Subsequently the miners were rising, with Antofagasta climbing 24p to 1,364p while Vedanta Resources was bumped 25p higher to 1,502p.

Top of the pile was Essar Energy, with the oil group moving off an all-time low to finish 5.8p stronger at 113.4p. It made the move despite Goldman Sachs downgrading its rating to "neutral" following Monday's disappointing full-year results, while the bounce prompted the revival of vague speculation that its majority shareholders may be interested in taking it back private, although the idea was widely ridiculed when it emerged last month.

Grolsch-owner SABMiller managed to stay steady at 2,574.5p despite Nomura taking the fizz out of its takeover hopes. The brewer has been linked recently with a possible move from Budweiser giant Anheuser-Busch InBev, but the broker's analysts said they were "sceptical" over the prospect, claiming it was not "clear that new management could run SABMiller better".

Down on the FTSE 250, Laird enjoyed a late rally to close 6.6p better off at 175.7p after Cooper Industries said it would continue to look for acquisitions. Last year the US electricals group made a failed 185p approach for the maker of electro-magnetic shielding devices for laptops, although City voices said they were not convinced Cooper would now be prepared to increase its bid.

The clear winner on the mid-tier index was Persimmon, which shot up 88p – or 14 per cent – to 715p after the housebuilder revealed it managed a forecast-beating 55 per cent jump in underlying profits last year, while it also announced shareholders were in for a windfall return of £1.9bn.

The results gave a boost to its peers, with Taylor Wimpey and Barratt Developments lifted 2.98p to 52.65p and 7.8p to 149.2p respectively.

Dixons was given a push by Panmure Gordon's analysts, who played down fears the electronics retailer would not be able to pay its 2012 bonds. They reiterated their "buy" rating, and the chain ticked up 0.43p to 14.93p in response.

The battle for Cove Energy took another twist after India's ONGC and GAIL revealed they might make a joint offer for the oil explorer following reports from the country claiming the two were mulling over whether to make an approach worth 245p.

This would be much higher than the previous 220p and 195p-a-share offers Cove has received from Thailand's PTT and Shell (up 2.5p to 2,348.5p) respectively, and the group pushed up 5.75p to 240.5p on AIM as a result.

However, its fellow Africa-focused oil group Bowleven was not so lucky. Vague rumours in early trading that Dragon Oil (18p stronger at 599p) could be about to announce an offer proved wide of the mark, with it instead revealing it was not going to make a bid. As a result Bowleven slumped 24.02 per cent to 102p.

Andes Energia soared up 40.09 per cent to 77.75p after the energy group said it was splitting into two. It also announced successful exploration results from Argentina, with some in the Square Mile especially bullish over the amount of oil it is believed to have found.