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Prudential puts on 1.5% on vague bid talk, while FTSE edges higher on Greek hopes

It’s a week of anniversaries, from the 9/11 terrorist attacks in 2001 to the run on Northern Rock in 2007 and the collapse of Lehman Brothers a year later.

And exactly a year ago to the day Prudential shares moved sharply higher on talk of possible bid interest from China. As the market moved ahead on cautious optimism about the Eurozone crisis, the exact same tale came round again, with traders hearing talk of a takeout price of around 720p for the insurer. This was enough to push Pru shares 8.5p higher to 576.5p but Manoj Ladwa, senior trader at ETX Capital, said:

I find it incredible that no names have been mentioned but an entire nation, and yet a specific price is being talked about.

He said the rumour was probably due to Pru chief executive Tidjane Thiam currently being on a trip to China.

With a number of stories – including China supporting the Eurozone by buying Italian bonds, and the French and German governments preparing to issue a statement supporting Greece – the FTSE 100 finished 44.63 points at 5174.25, despite none of the speculation seeming to come to anything.

Following Monday’s falls on debt worries and the Vickers report, banks were back in favour. Royal Bank of Scotland rose 1.11p to 21.88p, Barclays was 6.65p better at 148.3p and Lloyds Banking Group added 1.27p to 31.83p, the three top risers in the leading index.

Autonomy added 13p to £25.30 as Hewlett Packard announced it had received acceptances for its .2bn bid for the software company representing 41.6% of the shares by the first closing date, and was extending the offer to October 3. Analysts said the HP bid was likely to succeed, with no other bidder in sight. Espirito Santo said:

We had previously highlighted the potential of a counter-bid. However, given it has been 20 days since the offer was announced we believe that the probability of a counter-bid is very low.

Elsewhere Sage rose 5.9p to 254.3p after Exane BNP Paribas raised its rating for the accountancy software specialist from underperform to neutral.

But Cairn Energy closed 25.5p lower at 287p after it admitted its latest well in its controversial Greenland drilling programme had failed to find oil or gas, the second disappointment so far.

Ashmore – the fund management group which will join the FTSE 100 next week – dropped 14.9p to 385p after disappointing results and some profit taking following recent rises.

Among the retailers Kesa Electricals, which reports first quarter results on Thursday climbed 3.5p to 93.75p following a positive note from Liberum Capital. Liberum said:

The apparent failure of the Comet sale process is not the end of the road for Kesa and we estimate that the collapse in the share price now discounts £500m, or more than 11 years, of losses or exit costs for Comet and its other developing businesses. While the market now fully understands and discounts the strategic and operational issues surrounding the consumer electronics retailers, unlike peers, Kesa has strong balance sheet and cash generation, freehold assets and an activist shareholder. It is thus the lowest risk and the most likely to find a solution. Ahead of what could be a turbulent first quarter update and annual meeting on Thursday we reiterate buy with a 120p target price.

Game Group was steady at 19.75p ahead of a presentation of a series of new titles such as Gears of War 3 and Modern Warfare at its Gamefest show in Birmingham on Friday. Nick Bubb at Arden said:

With the interims so close (September 27) Game could have been excused if they had just laid low, but they must believe in the strength of the new games, although Game are also always bullish/too bullish about such matters. But even if Game is half right, the shorts would be squeezed, despite the fact that the share price has been destroyed of late. Below 20p, it is telling us that big profit downgrades lie ahead and the latest Chart-Track data in MCV magazine shows that software sales were 20% down last month on last year, which does not augur well for the Game current trading update. But after a dismal first half, Christmas will now make or break the year. We recognise that our pretax profit forecast of £27.5m for this year will have to come down, but even so we struggle to justify the current derisory valuation of Game. So although we sit on the fence with our neutral view on Game, ahead of the interims, we sense that the next big move in the share price should be up.

Ocado added 1.2p to 114.2p despite another negative note on the online grocer. Panmure Gordon analyst Philip Dorgan repeated his sell recommendation and slashed his target price from 103p to 50p. He said:

We continue to believe – as does consensus – that Ocado will not make an adequate return on capital for the foreseeable future, and that it will struggle to generate cash. This has obvious medium term implications and means that the shares continue to have downside potential. At 50p, Ocado’s enterprise value to sales ratio would still be nearly twice that of Sainsbury’s.

Ocado is to report third quarter sales numbers on September 19. The few forecasts that we have seen expect that sales will have been impacted by capacity constraints, and that gross sales growth will perhaps be a bit lower than the 18% generated in the second quarter.

As forecasts have been downgraded, it becomes difficult to value Ocado on a discounted cashflow basis. Equally, as growth rates slow and returns remain low, it is not appropriate to value Ocado as ‘another Amazon’. Increasingly, we believe that it will be valued relative to its multichannel competitors. This appears sensible, but it is not supportive of the current share price.

Lower down the market Xenetic Biosciences added 1.5% to 8.125p after the vaccine developer’s chief executive Scott Maguire took part in David Cameron’s official visit to Russia. The company met Russian biotech business the Human Stem Cell Institute to discuss opportunities for collaboration and investment in Russia’s biotech market.

Finally Gulf Keystone Petroleum climbed 11p to 181.5p as investors bought the shares ahead of its half year results today on Wednesday. The company has been suggested as one potential target for Genel Energy, the company resulting from the reverse takeover of Turkey’s Genel by Vallares, the acquisition vehicle of former BP boss Tony Hayward. © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds