Market report: Balfour bound for blue chips

By GEOFF FOSTER FOR MAILONLINE
Updated:


Having missed out on promotion to the Footsie by a whisker in December, Balfour Beatty must fancy its chances to join the elite group at the next FTSE quarterly constituents meeting in March. Shares of Britain's biggest road construction group jumped 14½p more to 358¼p to trade 61 per cent above its low after Citigroup upgraded to buy from hold, and lifted its target price to 400p from 280p ahead of results on January 14.

The broker is confident Balfour will benefit from increased public sector spending by governments around the world, notably the UK and, even more so, the US. Its valuation doesn't even take account of the opportunities in new-build nuclear projects or the group's likely involvement in the Cross-Rail project.

Balfour has had a hand in a host of Britain's nuclear installations and should get a call from EDF, the French energy giant, which plans to spend £22billion in the UK over the next 12 years building four new nuclear plants.

balfour beatty

Blue chip bound: Balfour Beatty is trading 61 per cent above its low

It should also be heavily involved in the government's £16billion Crossrail scheme to create an east-west rail route across London. Balfour is already in a healthy state with a burgeoning £12billion order book and £200million cash in the bank.

Buyers also loaded up with construction group Carillion, 9¾p better at 278½p. They responded to news it has closed on yet another contract  -  this time with Nottingham City Council to provide one of the first primary schools to be built under the Government's £7billion Primary Capital Programme. AMEC reflected a Daily Mail 2009 investment recommendation with a gain of 25p at 533p.

Hoping to see interest rates halved to 1 per cent on Thursday, a level not seen since the Bank of England was created in 1694, the Footsie climbed a further 56 points at the outset before profits were trousered. It traded 41points lower before closing 17.85 points better at 4,579.64.

Expectations that Barack Obama will help revive the US economy with a major package, including tax cuts, failed to inspire Wall Street. It lost almost half of Friday's 258 point gain on profit-taking in early trading.

Consideration of their defensive qualities attracted interest in International Power, 18¼p up at 265¾p, and power generator Drax, 33p higher at 609p. Support services group Serco rose 28¾p to 484¾p amid reports of a pending bullish circular.

JP Morgan advised clients to switch on to telecoms because the sector is more than capable of maintaining or increasing dividend payments this year. Cable & Wireless buzzed 7.3p higher to 165.8p and Vodafone 6.05p to 145.05p.

Concern about growing competition in the artificial sweetener market left Tate & Lyle 35¾p down at 386¼p. Sales of Sucralose, Tate's sweetener, now faces stiff competition from REB-A, produced by minnow PureCircle, 8p off at 191p. REB-A was recently approved by the US Food & Drug Administration for use in food and beverage production.

Consumer credit group Cattles recovered 4¾p more to 24¾p on hopes the Financial Services Authority will soon award it a banking licence.

Persisting takeover speculation lifted advertising group Aegis 4¼p to 81p. A press report suggested that chairman John Napier has approached Merrill Lynch to review the group's operating structure. It follows on the heels of the recent appointment of JP Morgan Cazenove as shop broker. Vincent Bollore is the largest shareholder with 29 per cent. Panmure Group lifted its target price to 100p from 80p.

Diagnostic company Akers Biosciences rose 1¾p to 12p after signing a £1.6million technology transfer and supply agreement for its Breath Test technology with US company Pulse Health. The test monitors free radical levels in the body via a inexpensive blow tube. Arbuthnot Securities rates the stock a strong buy and has a target price of 25p.

Another 4million-plus shares were traded in highly speculative AIM-listed GCM Resources as it gyrated between 138p and 52½p before closing 9½p down at 70p. Punters sprinted for the exit after the company said that other than previously announced steps to move the Phulbari Coal Project in Bangladesh forward, it wasn't aware of any other factors to cause the share price to soar. Polo Resources, which owns 29.8 per cent of GCM, firmed 0.05p to 2.43p.

Plexus Holdings, the oil and gas engineering services company, edged up to 40½p after announcing a new four year services contract with Brunei Shell Petroleum. Credit Suisse reiterated its sell recommendation on Aberdeen Asset Management, 3¼p cheaper at 122¾p.

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