Market report: Thursday close

By MICKEY CLARK FOR MAILONLINE
Updated: 12:30 EST, 12 April 2007

There are no losers when it comes to investing in shares of ICI. At least that is the conclusion of Merrill Lynch, which insists there is further scope for improvement in the share price with the prospect of a takeover of the chemicals giant thrown in for nothing.

Merrill continues to rate the shares a buy and has jacked up its price target from 535p to 585p for good measure. It argues there are more attractions to ICI than as just a bid target.

Much has changed since the Dulux paint group sold its Quest subsidiary for £1.2bn last November. The proceeds were used to strengthen the balance sheet and slash the pension fund deficit and that has helped the group become an increasingly attractive bid target.

The shares lost 5¼p to 531½p, where they trade 16½p shy of their sixyear high of 547¾p.

Share prices drifted lower in thin trading, reflecting a disappointing performance on Wall Street overnight, where investors are contemplating another rise in interest rates. But overall the FTSE 100 index rose 3.10 at 6416.40.

Sainsbury shed a further 3½p to 522&frac12p after the collapse in takeover talks with private equity yesterday. Cazenove sees this as an opportunityto upgrade shares in the supermarkets chain from underperform to in-line. But ABN Amro has cut its rating on Sainsbury from hold to sell, while slashing its target from 524p to 450p.

It does not believe a significant property release is possible without harming operational and financial flexibility. Panmure Gordon has also repeated its sell rating and target of 475p and does not expect the Sainsbury management to emulate Marks & Spencer by jacking up profits to record levels following a failed private-equity bid.

Cairn Energy was off 10p to 1585p after Citigroup resumed coverage of the shares with a hold rating and slashed its target from 2270p to 1700p. The broker says Cairn Energy trades at a 7% discount to net asset value and is not an expensive stock. But considering the operational outlook and drilling programme, it is struggling to reappraise its target-share price.

Shanks Group fell 10p to 260¼p after Merrill Lynch downgraded from buy to neutral because it thought the shares had run far enough. It now anticipates a period of consolidation for the waste disposal group until its outlook is clarified. Merrill said the shares had enjoyed a strong run, which has taken them to their best levels since September 1991, and through its 260p price target.

IMI lost 10p to 574p after being downgraded from buy to neutral by Goldman Sachs following strong performance by the shares of late. The US broker points out the price had outperformed the Eurotop 300 by 10% during the past three months, and has now exceeded its own target price of 575p.

Insurance broker Catlin Group rose 10p to 515p after Citigroup upgraded from hold to buy with the target moving from 500p to 640p. It describes the stock's valuation as compelling following its acquisition of Wellington.

Monterrico Metals rose 10p to 347½p after the Chinese consortium Xiamen Zijin Tongguan Investment Development Company said it had received acceptances of 13.1m shares, or 50.17% of the company. The offer has now gone unconditional.