City File: Budgens boost

THERE has been some speculative fervour in Budgens' shares since Rewe, the German group, bought Sir Ron Brierley's 26 per cent stake in April. But it seems Rewe merely wants to join forces with Budgens to launch a version of Rewe's 'Penny Market' discount food chain.

This could be good news for Budgens, as its initiative to win bigger discounts from food manufacturers through the Central Buying Company, formed with other small retailers, is starting to bear fruit. The effect in Budgens' full-year results, due on Wednesday, will be masked by the cost of setting up CBC. But even so, analysts are expecting a 70 per cent increase in pre- tax profits to pounds 6.8m, and a return of a 0.75p final dividend.

The Rewe excitement has forced Budgens shares up, and at 43p they look well valued in the short term. But if Penny Market succeeds, Budgens could be a good long-term bet.