NEWS THAT Liberty International had launched a pounds 240m convertible bond yesterday immediately set tongues wagging in the City on the issue of what the property group is going to do with the cashits raises.
Although Liberty, whose shares ended the day as the worst performer in the FTSE 100, down 23.5p at 645p, maintained the money was for “general corporate purposes”, market professionals were having none of it and immediately started to speculate. One story suggested that Liberty may use the cash to make a bid for its rival Great Portland Estates, up 2p at 231p. Liberty already controls 26 per cent of the group’s shares.
However, analysts, who on the whole were surprised by yesterday’s bond launch, suggested it is much more likely that Liberty will use the money to buy a 30 per cent stake in Bluewater, Europe’s biggest shopping centre. Earlier this summer the shopping centre’s Australian owners, Lend Lease, hinted that they were looking to sell the asset, which does not fit in well with the rest of their operations.
Meanwhile, Deutsche Bank was far from impressed by Liberty’s bond issue. The broker reiterated its “sell” rating on the stock and 550p price target. “We see little need or justification for [Liberty’s] issue of bonds,” Deutsche was heard telling its clients. The bond market also responded coolly to the launch and late on in the day it emerged that the property group had been forced to reissue the deal on cheaper terms.
The FTSE 100 index fell 6.0 points to 4,293.0 after a lacklustre start to trading on Wall Street. Dealers suggested that several institutional investors felt uneasy with the market trading above the 4,300 level and reported that some had taken out protection against short-term falls by the index through various futures contracts. The FTSE 250 gained 22.3 to 5,689.8 while the techMark 100 added 6.2 to 956.2.
The heavyweight broker Cazenove helped push Man Group 10p higher to 1,316p as it urged investors into the stock ahead of interim results from the hedge fund manager, due in November. The broker expects upbeat comments from Man at a forthcoming investor day and strong interim results from the group. Hence Cazenove warned its clients not to be caught short of the stock. For the full year to the end of March 2004, the broker forecasts an impressive 24 per cent jump in funds under management at Man and told investors that even this figure may well prove too conservative.
Marks & Spencer added 4.5p to 324.5p on the back of an upgrade to “add” from “hold” from Dresdner Kleinwort Wasserstein. “Our analysis shows that M&S should hit the goals it has set for itself on gross margins and costs, leaving possible room for upgrades to consensus forecasts,” the German broker said. Courts Furniture rose 7.5p to 307.5p after Evolution Beeson Gregory returned from a meeting with the group in an upbeat mood. Evolution reported that Courts’ key UK furniture business is progressing well despite the generally tough trading conditions for furniture retailers.
WS Atkins added 23p to 401.5p as analysts upped their forecasts in the wake of Tuesday’s bullish AGM statement from the support services company. Investec Securities upgraded its pre-tax profits estimate for the current year from pounds 41m to pounds 46m.
Lower down the pecking order, ITIS Holdings jumped 5p to 30p after unveiling a three-year contract with BMW. This is the group’s biggest contract to date for its traffic message product RDS TMC and is its third in the past month. According to Altium Capital, the deal immediately delivers substantial ongoing revenues to ITIS and demonstrates that the company’s RDS TMC product has become the industry standard. Centurion Energy gained 0.5p to 78p despite news that a director, Michael Miller, had sold 291,000 shares.
And finally, Gaskell, the upmarket floor coverings group, ticked 1.25p higher to 19.75p as it emerged that Peter Gyllenhammar, the Swedish value investor, had taken a 29.1 per cent in the group. He picked his stake up from Derbyshire Group, a private company also in the floor coverings industry. Gaskell seems an archetypal Gyllenhammar investment. It is an Old Economy company, with a solid balance sheet but finds its shares very much out of favour. Back in 2000 they traded at about 90p.
Gaskell certainly has had a tough time of it recently. It has seen profitability totally evaporate over the past four years and last year posted a pre- tax loss of pounds 8m. So it may be some time before Mr Gyllenhammar sees a return on his investment. But he certainly seems to be a patient man. He bought into the building materials group Cape some years ago at 10p a share and had to wait until April this year for the shares to really start. However, when they did they soared enabling Mr Gyllenhammar to sell his 25 per cent stake earlier this month at a little over 60p. Yesterday Cape rose 1.5p to 63p.
