Market Report: Yell's gains are music to investors' ears

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The Independent Online

In "Rebel Yell", Billy Idol sang of his little dancer who wanted "more, more, more". Investors in Yell Group were similarly chirpy yesterday, as the extraordinary rise of the directories business continued.

Yell stormed to the top of the FTSE 250 yesterday, up a fifth to 65p. The shares have trebled since early July and are up from a year low of 13.5p in March. If you believe the analysts at Cazenove, the gains won't stop there.

They said in a note: "Although Yell has bounced about 75 per cent over the last month, we believe the share price could still see further upside on a successful re-financing of the balance sheet and confirmation that trading conditions are gradually improving."

The blue-blooded broker added it expects Yell to generate up to £650m in annual cashflow over the next three years, although its recommendation remained "in-line" until clarity over on the timing and the terms of the group's refinancing emerge.

The FTSE 100 continued up yesterday and was in touching distance of the 5,000-point mark, but after a small sell off at the close finished up 14.16 points at 4,947.34. The rise was supported by better-than-expected manufacturing data, which saw output rise at its fastest rate in 18 months. The Office for National Statistics posted a 0.9 per cent rise in July, fuelling hopes GDP would expand this quarter.

Big oil was up as the price of black gold strengthened to more than $69 a barrel, with Royal Dutch Shell up 1.5 per cent to 1,685p. The miners also helped lift the Blue Chip index on firmer metal prices, especially gold itself, which rose through the psychological benchmark of $1,000 an ounce. This helped Randgold Resources lift 3.2 per cent to 4,354p as well as the sale of its interest in the Kiaka Gold Project. There was still some M&A speculation sloshing around the sector, strengthened by the so-called return of big deals in the wake of Kraft's offer for Cadbury. Lonmin had been up on rumours it could expect an offer from Xstrata, but the gossips had the Anglo-Swiss miner going after Anglo American instead yesterday. Anglo rose 1.47 per cent to 2,036p.

Talking of Cadbury, it enjoyed further rises after support from Bank of America and Evolution Securities. Evos analyst Warren Ackerman agreed that Kraft's 745p cash and shares offer "fundamentally undervalues" Cadbury.

The US firm was likely to up the deal, he said, and "there is a 30 to 40 per cent chance of a counterbid, most likely from a Nestlé-Hershey consortium," and raised the target price to 900p. The chocolate group rose 3p to 786p.

InterContinental Hotels was also lifted by the analysts, after Credit Suisse posted a note on the European hotel sector titled "a brightening future". Analyst Peter Hyde slapped an "outperform" rating on the stock up from "neutral" with a 910p target price, citing recovering revenue per available room and cheap valuations relative to the sector. After setting the top tier pace early on, it closed second in the table up 5.47 per cent at 810p.

Airport body ACI Europe provided the wind beneath British Airways' wings, saying July's 4.3 per cent fall in passenger traffic was not as severe as the average 9.6 per cent drop in the first half. BA flew 4.25 per cent to 201p.

Other big M&A news – that of T-Mobile's agreement to team up with Orange – saw Vodafone investors breathing a sigh of relief that the company wasn't going to shell out £3.5bn on buying T-Mobile itself. Analysts also said yesterday's deal would ease the fierce competition in the UK market anyway. Vodafone rose 1.7 per cent to 136.8p.

A bungled leak of its draft figures on Monday didn't stop B&Q-owner Kingfisher storming higher. It rose 1p to 218p after announcing pre-tax profit of between £285m and £290m in the six months to the beginning of August.

On the downside, the insurers were looking weak as sentiment turned on with four sector fallers in the top 10. Worst of the entire index was Aviva, which fell 3.2 per cent to close at 399p.

As the market looked slightly more buoyant, traders switched out of defensives. Utilities fell, with Centrica down 2.12 per cent to 253.5p, while another staple – tobacco – was down with British American Tobacco closing 1.24 per cent lower at 1,910p.

There was a touch of profit-taking in Associated British Foods after its day of storming rises on Monday, and an S&P note compounded it, cutting the price target to 720p from 680p with a "strong sell" rating. It gave up 3.5p to close down 842p.

Top of the second tier was DS Smith, as investors rallied behind better than expected first quarter results. The paper and packaging group leapt 12.65 per cent to 93.5p after the company said it was doing better than the market and would hit expectations for the full financial year.

In the wider market, BBA Aviation rose on tentative bid speculation, sending it up 7.8 per cent to 12.3p.

Antibodies group Abcam has clearly had a good year, and it rose 6.85 per cent to 780p on AIM yesterday after announcing it had doubled profits to £16.3m in the 12 months to June.