The digital factor could alter Granada's prospects

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The Independent Online
The stock market is wrong over Granada, believes the Dresdner Kleinwort Benson investment house.

In an upbeat session the leisure group could only manage to edge ahead 3p to 805.5p, well below the 978.5p high hit earlier this year.

DKB does not expect the price to reclaim its peak but suggest the shares should at least be around 940p. The securities group's calculations actually produce a figure of 991p but "we sense the market is in the mood to apply a discount".

It believes the value of Granada's 50 per cent involvement in British Digital Broadcasting is being overlooked. An "impressive example of valuation creation" is worth, it says, pounds 313m or 37p a share.

Say DKB: "What is clear to us is that whereas the investment community is by now used to adjusting the Granada rating to take account of its significant but low-yielding stake in BSkyB, adjustments for BDB should also be made to reflect its present value".

Granada has had an eventful time since last year's epic pounds 3.9bn struggle for the Forte catering and hotel empire. Disposals have not come as quickly as expected and not all the businesses Granada intends to retain are performing to plan.

The leisure group has continued to expand, taking over Yorkshire-Tyne Tees TV. And DKB wonder about the possibility of a big contract catering acquisition.

Still, despite the sluggish display since this year's peak, Granada shares have put on a splendid show since chairman Gerry Robinson arrived in 1991, when they were bumping along around the 130p level.

The market continued to recover from Black Friday's upheaval with Footsie advancing 44.2 points to 4,958.1. No change in US interest rates helped although the exuberant pace of retail sales raised some questions whether domestic rates will remain for long at their present level.

The generators powered much of Footsie's charge. A climb down by the industry's regulator, with price-cut demands being sharply reduced, caused the excitement. With the generators cutting costs the proposed 7.5 to 10 per cent should be comfortably accommodated. Such thinking sent National Power up 23p to 539.5p and PowerGen 35p to 761.5p. ScottishPower brightened 11p to 431.5p.

British Petroleum gushed a further 34p to 893p on its involvement in what could be a significant oil discovery off Angola. Estimates of the Dalia field's reserves vary from 500 million barrels to a remarkable 2 billion. BP has a near 17 per cent stake. BG added another 5p to 259p.

Unilever, the Anglo-Dutch giant, encountered favourable analytical comment from Merrill Lynch and NatWest Securities; the shares rose 38.5p to 1,855p. NatWest said: "The earnings picture is looking very robust ... the next change in numbers is more likely to be up than down".

Kingfisher hardened 7.5p to 742p as US investment house Salomon Brothers put a 775p target on the shares; Boots, unchanged at 802.5p, was accorded an 875p valuation and Next, off 12p at 772.5p, an 820p figure.

Financials and drugs had a firm session but engineers and other overseas earners were constrained by a relatively firm pound. GKN tumbled 45p to 1,192.5p and Siebe 28.5p to 1,096.5p. Glynwed International gave up 9p to 239.5p. BTR's heady revival came to an abrupt halt; the shares fell 8.5p to 219p on the suspicion the recovery had been overdone.

Cable & Wireless Communications fell 13p to 252.5, a low, after Merrill Lynch seemed to struggle to place 8.9 million shares at 249p.

Huntingdon Life returned to market at 46.5p. The shares were suspended last month at 54p following worries over its controversial drug testing operations,

ML Laboratories, once at 468.5p, hardened 3.5p to 149p ahead of a meeting with institutional investors at Panmure Gordon today.

The Boosey & Hawkes music group, where takeover talks are on with at least four parties, jumped 165p to 1,062.5p.

ViewInn, last year above 600p, fell 5p to 52.5p, a low. The company, providing on-line information systems for hotels, said last month it needed more cash and was "intensively" seeking further capital. At the last count ViewInn's service was being used in two hotels.

Other once high-flying stocks to have slumped into deep despair include Tadpole Technology and Bakyrchik. Tadpole, once reigning at above 400p, fell 0.5p to 9p and Bakyrchik, seeking gold in the former Soviet Union, was off 4.5p to 32.5p. In the past year it has swung from 589p to 15p.

Taking Stock

Stockbroker Henry Cooke Lumsden make an intriguing case why shares of Golden Rose Communications should nudge 300p. They closed 1p higher at 73p, pricing the company at approaching pounds 10.5m. According to analyst David Gorman a recent take-over deal puts a possible valuation of pounds 39m on GRC's Jazz Radio franchises. The company, which is edging into catering, has cash of pounds 2.9m. Mr Gorman says his calculations may be unsophisticated but GRC is "massively undervalued".

A shake-up at Chemical Design. Founder and majority shareholder Keith Davies becomes technical director with Nick Bateman, ex-Zeneca, replacing him as chief executive. John Lambert is the new finance director.The shares, placed at 110p, rose 5p to 165p.