Market Report: CSFB bullish on Sky subscriber growth prospects

After a meeting with BSkyB's top brass, Credit Suisse First Boston is convinced that the satellite broadcaster is on course for a good Christmas.

After a meeting with BSkyB's top brass, Credit Suisse First Boston is convinced that the satellite broadcaster is on course for a good Christmas. The festive season is when Sky wins the bulk of its new customers and CSFB is convinced that the City is too cautious with its estimates for subscriber growth this time around.

Most analysts expect the satellite broadcaster to gain 120,000 new customers but after its meeting with Sky's management the Swiss broker believes that 138,000 can easily be achieved. Such comments helped Sky shares 6p better to 556.5p yesterday. CSFB also assured investors that rising marketing costs are not a problem at the company. The group is in the middle of a major marketing campaign aimed at developing its brand and there have been some concerns about spiralling costs.

But investors need not worry, according to the broker. At its meeting with Sky, CSFB was told that marketing costs were well within the guidance that the company gave at its strategy presentation in August.

Meanwhile, the Swiss broker also got the market excited about Tomkins, up 7.75p to 268p, ahead of third-quarter figures from the engineer today. CSFB is convinced that Tomkins can continue to deliver strong organic sales growth, despite some tough trading conditions, and so set a 300p price target on the stock. The wider FTSE 100 index rose 9.3 points to 4,742.4 while the FTSE 250 rallied 28 to 6,569.

Kingfisher, off 2.25p to 292.25p, was undermined by a slightly more cautious tone on the DIY giant from Deutsche Bank. The broker cut both its price target and earnings forecasts to take account of a slowing retail environment in the UK.

Elsewhere in the sector, ABN Amro was rather brutal about Game Group's prospects in the run-up to the all-important Christmas trading period. Shares in the computer games retailer fell 0.5p to 68.5p as ABN cut its rating to "reduce" from "buy" and predicted that this Christmas will be tough for Game. It warned that the group's earnings are vulnerable to downgrades.

Among oil and gas explorers, companies with exposure to Mauritania found themselves under selling pressure with Sterling Energy, down 0.75p to 17p, and Hardman Resources, off 1.75p at 83.25p, the worst hit. Dealers reported worries about the political situation in the west African country. In June 2003 army officers launched a coup attempt that led to 36 hours of fighting and 15 dead. A second abortive attempt to topple the Mauritanian leader, President Maaouiya Ould Taya, was made in August of this year. In the aftermath his government accused Libya and the west African state of Burkina Faso of supporting the plotters. Investors fear that another political flare-up is just around the corner.

Those who like to trade on the back of bid rumours were certainly busy yesterday. Old takeover favourite SSL International was again boosted by talk of an imminent move on the group from a predator. Its stock closed 4p better at 277.75p as an above average 14.5 million shares changed hands.

The brewing giant Scottish & Newcastle was also in demand thanks to bid speculation while French Connection added 10p to 265p amid vague suggestions that Marks & Spencer, down 4.25p to 339.5p, might be interested in buying the fashion retailer.

NSB Retail gained 1.5p to 29.75p on talk that its peer Torex Retail, up 2p to 79.5p, would like to buy it. Analysts who follow both companies were not so sure. They noted that Torex has more than enough on its plate after its £30m acquisition of Alphameric's retail business last week. Filtronic improved 16.75p to 216p on rumours that a major disposal could soon be on the way at the telecoms equipment group while Biocompatables rose 8.5p to 243p as traders bet that the biotech will soon be in a position to issue positive trial data for one of its core products.

Cambridge Mineral Resources added 0.5p to 11p as the mining group boasted that it will soon be up and running as a gold producer in Peru. Investors should not be surprised to see more bullish news from CMR in the coming months. Dicom lost 2.5p to 802.5p after its chairman, Otto Schmid, sold 120,000 shares at 800p each.

Among yesterday's most interesting AIM floats was SovGEM. The China-focused private equity house raised £3.1m via a placing conducted by Teather & Greenwood at 50p a share. By the end of the session SovGEM stood at 58p. The group hopes to take sizeable stakes in private Chinese firms who aim to eventually make it on to international stock exchanges and already has a deal with a local investment bank which will help SovGEM with the due diligence process.

Market movers

↑ BHP Billiton 601.5p (up 15.5p, 2.6 per cent). Completes its share buy-back programme.

↑ Land Securities 1,250p (up 20p, 1.6 per cent). JP Morgan upgrades its price target on the property giant to 1,375p.

↑ British Land 802p (up 9.5p, 1.2 per cent). Says it has entered into an agreement to pre-let two of its new London buildings.

↑ TBI 89.25p (up 4.5p, 5.3 per cent). Rumours that a 95p-a-share offer for the company is imminent excite.

↑ Stanley Leisure 444p (up 21p, 4.9 per cent). Malaysian conglomerate Genting Berhad lifts its stake in the casino operator.

↑ Enodis 93.5p (up 2.5p, 2.7 per cent). Posts better-than-expected full-year results despite pressure on its profits from the weak dollar and the rising price of steel.

↑ Pursuit Dynamics 164.5p (up 39.5p, 39.5 per cent). Signs licensing deal with Coca-Cola Enterprises.

↑ MS International 70p (up 12.5p, 21.7 per cent). First-half profits soar to £1.4m from £347,000 a year earlier.

↑ UA Group 1,425p (up 225p, up 18.7 per cent). Accepts 1,470p-a-share offer from Elphinstone Land.

↑ Conroy Diamonds 3.5p (up 0.5p, 16.7 per cent). Annual losses narrow at the group.

↓ InterContinental Hotels 664.5p (down 15p, 2.2 per cent). Brokers express disappointment at the group's third-quarter figures.

↓ GWR 232p (down 10p, 4.1 per cent). Issues a rather gloomy prognosis of the radio advertising market.

↓ Acambis 260p (down 8p, 2.9 per cent). Reduces its full-year sales forecasts.

↓ Big Food Group 88.5p (down 1.75p, 1.9 per cent). Numis Securities reduces its price target to 80p from 85p as rumours that Baugur's bid has hit a snag persist.

↓ IFG 53p (down 14p, 20.9 per cent). Warns that its full-year results will not meet market expectations.

↓ Tribal Group 151p (down 18p, 10.7 per cent). The support services group issues a profit warning.