MARKET REPORT: Has bookclosed on Betfair run?

By GEOFF FOSTER FOR MAILONLINE
Updated: 17:46 EST, 19 November 2010

A red hot tip for inclusion into the FTSE 250 next month following October's spectacular market debut, Betfair cantered 9p further forward to 1468p to stand almost 13pc above its flotation price of £13.

The world's biggest international online sports betting company now has a valuation north of £1.3bn, a level which many City folk believe to be a bit toppy.

Analyst James Hollins at Evolution Securities remains a seller and has a target price of 1140p. He has again advised clients to trot for the exit on hearing that Betfair had lost a landmark legal decision against a wager-based tax on horse racing in New South Wales, Australia.

Betfair initiated proceedings against Racing NSW in 2008, stating the levy of 1.5pc on horse racing wagers discriminated against Betfair, which takes commission on customers' winnings, rather than the gross margin generated by bookmakers.

The company, which operates its online betting service out of Hobart, argued that the fee breached Australia's constitution, which says that trade between states 'shall be absolutely free'.

Hollins fears Betfair is facing increasing regulatory risks and its business model does not work if wager taxes are applied. If other countries such as France, that has wager tax, or other Australian States follow this example, Betfair could not operate profitably in these territories, he said.

Rival Sportingbet, whose chief executive Andy McIver this week blamed 'press leaks' for the breakdown of merger talks with Unibet, edged up 0.2p to 60.05p ahead of Wednesday's first-quarter figures. Panmure Gordon has a target price of 78p and expects a confident outlook statement.

The Footsie ended the week on a friendless note, closing 35.88 points off at 5,732.83 on continuing uncertainty over Ireland's debt rescue and following China's decision to raise bank reserve requirements for the second time in two weeks to control inflation. Wall Street traded 50 lower in early trading.

Buyers chased technology company ARM 14.3p higher to 385p. Galvan Research reckons ARM remains the darling of the tech sector and in the wake of the tablet and smartphone mania of 2010, the chip designer is likely to see further significant benefits going in to 2011.

Good figures overnight from computer giant Dell and demand ahead of an analyst/investor day on November 29 lifted Autonomy 17p to 1417p. Revived US bid talk accompanied a gain of 10.9p to 295.2p in hedge fund giant Man Group, 10.1p up at 294.4p.

Nervous selling amid fears that new chief executive Guy Berruyer has an expensive European acquisition up his sleeve dragged business software group Sage 8.2p lower to 261.1p.

Biocompatibles was a picture of health at 391p, up 54.5p, after agreeing to a 430p a share bid from BTG, 19.4p lower at 231.6p. The deal didn't impress every shareholder as there was only a 10p a share cash element in the purchase price.

However, broker KBC Peel Hunt described it as a 'sensible acquisition' for BTG as it brings in a £36m revenue stream, a £33m cash warchest and an underlying profitable business. The deal will enhance earnings in the first full year.

Faroe Petroleum eased 5p to 174.25p following a placing of 37.7m shares at 165p a share. The £60m raised will help accelerate the growth of the company over the next few years. Interestingly, utility giant Scottish and Southern Energy (1p easier at 1156p) took a 5pc stake in Faroe via the placing. Panmure Gordon is bullish because the partnership will allow Faroe to provide industry expertise and help identify potential acquisition targets. S&SE's strong balance sheet will also help finance any deals.

Porvair advanced 5.5p to 95p after announcing a ten year contract worth as much £25m with Parker Hannifin to supply the group's filtration system for Parker's aircraft fuel tank system.

Following recent underperformance, a positive trading update attracted buyers to life insurer Chesnara, 14.8p better at 217.8p. The management is on the acquisition trail and remains open-minded as to whether the next move will be in Europe or UK.

A better-than-expected third-quarter trading statement helped <b>PV Crystalox to add
3.75p at 54p. Altium Securities upgraded its current year earnings per share forecast by 9.3pc to 5.4p a share. The broker says the company continues to demonstrate its ability to compete with low cost Chinese and Asian PV suppliers. Its target price is 85p.

Gold mining minnow Ascot Mining raced 14p or 60pc ahead to 86p in a thin market after announcing plans to move to AIM from PLUS Markets.

It has also secured funding of £3.7m, including £1.5m from Red Rock Resources who has taken a strategic shareholding in the company. Red Rock's chief executive Andrew Bell said: 'Ascot is now poised to accelerate its gold production over the coming months.'