A SPIKE in the share price of the house builder Crest Nicholson yesterday immediately set tongues wagging that the group will be the next in the sector to be on the receiving end of a bid. Thecompany has for some time been viewed as a takeover target, along with its rivals Bellway and Westbury, as the sector has slowly consolidated over the past two years. Among those viewed as likelypredators were the usual suspects: Persimmon, Taylor Woodrow and George Wimpey.
Crest shares certainly trade at a discount to their peers and analysts reckon this is no longer warranted as the company has become a focused house builder. Given this discount, now would be a perfect time for a rival to pounce. If there is a predator stalking the group, the key to the success of any bid will be the price at which it is pitched as there are no major family shareholders who may have some emotional attachment to the company.
Arbuthnot Securities is among those who believe Crest is undervalued irrespective of whether a suitor is lurking. It reckons the group’s shares should trade close to 510p. Yesterday they jumped 8.5p to 257p. One possible factor which may discourage a suitor from launching a move is Crest’s hefty debt burden. Gearing at the group stands at about 75 per cent, some way higher that the rest of the sector. Elsewhere in the sector things were more subdued. Barratt lost 4p to 444.25p, Berkeley was unchanged at 762.5p, Bovis Homes rose 0.5p to 424.5p and Persimmon ticked 3.75p higher to 489.75p.
In the FTSE 100, BP added 0.75p to 415p after UBS Warburg upgraded its recommendation to “buy” from “hold” as the Swiss broker argued that the stock has underperformed its peers for long enough. Since the start of the year BP shares have underperformed ExxonMobil by 6 per cent, Royal Dutch Shell by 7 per cent and ChevronTexaco by 13 per cent as part of a gradual derating of the stock over the past two years. UBS reckons the market has gone too far with its pessimism towards BP.
The FTSE 100 index fell 28.9 points to 4,044.3 amid talk that a large Swiss hedge fund had executed a major sell order and had totally exited UK equities. Also weighing on the blue chip index was a negative start to trading on Wall Street. To blame were weaker- than-expected second quarter figures from Merck, the world’s third- largest drug maker. Meanwhile, technology stocks were hit by a profit warning from Lexmark International, the world’s second biggest printer maker after Hewlett-Packard, which complained of weak corporate and consumer demand. Hence, the techMark 100 lost 10.4 points to 814.4.
Northumbrian Water, which floated on AIM in May, was 1.25p higher at 111.25p after Deutsche Bank started coverage of the stock with a “buy” recommendation. The group’s shares are expected to move to the main market in September and the German broker reckons they should trade closer to 150p. Deutsche believes that the regulator’s review of water prices in 2005 will be beneficial for Northumbrian and forecasts prices will rise in real terms between 2005 and 2010.
DTZ Holdings, the international property consultants, jumped 8.5p to 103.5p as Killian O’Higgins, an executive director, disclosed the purchase of 105,000 shares at 95p each. There was also director share buying at Mothercare, off 1p to 160.5p. Ben Gordon, the chief executive, bought 7,000 at 162p while the finance director, Steve Glew, picked up a more modest 5,000 at the same price. Landround gained 19p to a year’s high of 305.5p. The AIM-listed travel promotions group is believed to have made a series of well received presentations to private client brokers on Friday.
Hardman Resources lost 0.25p to 23p as the Australian mining group raised pounds 9.4m via a placing of 42 million new shares at 22p each. The stock was placed with UK institutional investors and Hardman plans to use the cash to fund its operations in Mauritania. Carr’s Milling jumped 9p to 317.5p on talk of strong trading at the group’s US unit. Word has it the division enjoyed record business during May and June. Gossips reckon brokers will soon have to upgrade their earnings forecasts.
Caffe Nero added 1p to 25p as directors at the coffee bar operator piled into the stock. Leading the way was Gerry Ford, the group’s chief executive, via the purchase of 204,000 shares. Ben Price, the finance director, bought 20,000 while non-executives John Barnes and David King picked up 81,000 and 40,000 respectively. All purchases were at 24.25p.
Back in February, Caffe Nero surprised investors when it broke into the black for the first time. It posted a first half pre-tax profit of pounds 450,000 as sales at its 111 outlets soared by 70 per cent to pounds 19m. Gerry Ford told the market that he had no plans to take the group’s business abroad until it had at least 150 outlets in the UK, which should be achieved by the autumn.
