MARKET REPORT: Flying start for flotation three

By GEOFF FOSTER FOR MAILONLINE
Updated: 16:46 EST, 10 December 2010

Fingers crossed - the market is set for a bullish 2011. Equity strategists are mostly confident the Footsie will end the year above 6,000. Jonathan Jackson, head of equities at broker Killik, has a year-end forecast 14 per cent higher at 6,600 helped by a continued recovery in earnings, a potential switch from bonds into equities and attractive dividend yields. With that in mind it was no surprise then to see three new IPOs get their stockmarket debuts off to a flying start yesterday.

It was blue skies all the way for UK airline Flybe as it left its offer-for-sale price of 295p miles behind in conditional trading. It touched 341.25p before closing at 342.75p for a tasty premium of 16 per cent. The £66million funds raised from the flotation will be used to fund the expansion of its fleet of 70-to-120 seat aircraft and to bolster its balance sheet.

Placed on AIM at 165p, shares of gold exploration company Hummingbird Resources were supported up to 204.5p before closing at 179p, a useful premium of 7 per cent. The company aims to use the £4.6million proceeds to fund the next phase of exploration in Liberia.

Technology company InternetQ made it a hat-trick of successful debuts, rising from a placing price of 120p to 145p before closing at 135p for a 14 per cent premium. The group makes marketing software for mobile phones and offers digital entertainment in a number of international markets. It is connected with 55 network operators in 24 different countries, reaching over 573million mobile subscribers.

Management intends to use the £5.7million flotation proceeds to expand the group's network technology equipment and enhance its mobile marketing platform.

In October Betfair, the world's biggest international online sports betting company, enjoyed a spectacular debut. It soared above the £13 flotation price to trade at £16.10, but it's been downhill ever since. Dealers have trousered profits on fears of growing regulatory risks. Sellers were certainly out in force again ahead of Tuesday's interim results, leaving the close 29p lower at £12.35.

The Footsie ended the week quietly firm at 5,812.95, up 4.99 points. Wall Street rose 20 points at the outset following news that the US trade deficit narrowed more than expected in October to $38.7billion, down from a revised $44.6billion in September.

Miners reflected higher commodity prices despite China opting to raise its reserve requirements as it tightened monetary policy. Vedanta Resources climbed 70p to 2275p and Xstrata 21p to 1441p. Anglo American added 32.5p to 3027.5p after securing a key licence for the development of its Minas-Rio iron ore project in Brazil.

Persistent talk of a possible bid from US aerospace giant Northrop Grumman left Cobham up a further 5.9p to 209.5p. The UK defence group was booted out of the Footsie on Wednesday.

Down 19 per cent since October, BAE Systems rallied 5.7p to 330.5p with the help of an Execution Noble recommendation. The broker says BAE is better positioned than most of its peers as it has a large and growing Saudi position. Its ship repair business is a bright spot within the US and the group has managed the decline in Land and Armament well.

Numis advised clients to sell Imagination Technologies ahead of Tuesday's interims. No sooner the word, the deed, and the close was 18.6p lower at 363.9p. The broker said it remained attracted to the group's positioning and prospects, but with the stock up 76 per cent over the past year, investors are conscious that a lot has been priced in.

Buyers continued to chase Avesco 24p higher to a year's high of 130p. The provider of audiovisual services to the corporate entertainment and broadcast markets is in line for a cash windfall if, as expected, a US court overules an appeal made by Walt Disney in a long-running legal dispute with Celador International.

Avesco retained a stake in Celador after it was demerged from the rest of the company in 2003. The dispute centres on Disney's screening of the Chris Tarrant-fronted gameshow Who Wants to be a Millionaire? Celador was awarded £178million damages in July. If the verdict is upheld Avesco will distribute the cash windfall to shareholders. The sum would be equivalent to around 115p to 125p per share.

Communications network group Norcon slumped 8p or 12.4p to 56.5p on a profits warning. A delay in two new projects, which are high margin contracts, has affected second-half revenues and gross margin.

Controversial Ukraine oil explorer Regal Petroleum gushed 5.75p or 29.7pc to 24.25p on the announcement the company is in final stage talks for a takeover which would value it at £76m or 24p a share.

LIBERUM Capital reckons Lupus Capital, down 0.25p at 103.75p, has the potential to be a rising star among building materials companies. It has the potential to return to good profitability levels once the market recovers. Its target price is 140p. Its entire board has been replaced since July 2009 with a high calibre team that could also run and add value to a much bigger group.