Market Report: BPB heads for FTSE despite prices pressure

Cautious comments from two leading brokers put BPB shares under selling pressure yesterday but the setback for the stock is unlikely to spoil the plasterboard maker's return to the FTSE 100 after a 14-year absence. BPB lost 8.5p to 509.5p as both Credit Suisse First Boston and Numis Securities warned investors that plasterboard prices in the US look set for a downturn over the coming year.

Cautious comments from two leading brokers put BPB shares under selling pressure yesterday but the setback for the stock is unlikely to spoil the plasterboard maker's return to the FTSE 100 after a 14-year absence. BPB lost 8.5p to 509.5p as both Credit Suisse First Boston and Numis Securities warned investors that plasterboard prices in the US look set for a downturn over the coming year.

Both brokers expect American supply to start to increase during the next 12 months at a time when demand for plasterboard, used in the construction of houses, is likely to contract. The trigger for this fall in demand will probably come from the rising mortgage costs being experienced across the Atlantic. CSFB, which predicts that prices will start to fall next year, said: "While developments in European markets remain broadly positive for BPB, we do not believe that they will be sufficient to fully offset the expected US slowdown."

As a result, the Swiss broker cut its 2006 earnings forecast by 6 per cent. Meanwhile, Numis Securities downgraded its rating on BPB to "hold" from "add". Despite the retreat in BPB's share price, the group is still tipped to win promotion to the FTSE 100. The results of the index's latest quarterly review will be announced tomorrow and BPB is likely to be accompanied in the top flight by the commercial property group Hammerson, up 0.5p to 910p.

Elsewhere, Evolution Group looked set to be ejected from the FTSE 250 index after registering a further 0.75p drop to 124p. Shares in the stockbroker have lost 20 per cent of their value since the end of April, when it completed the now controversial £45m fund raising for Regal Petroleum. Investors worry that the episode has damaged Evolution's reputation and may cause a backlash against the broker from institutional investors. Others in danger of demotion from the FTSE 250 are SMG, down 0.75 to 92p, Alea, off 2.5p to 175.5p, and Cambridge Antibody Technology, 6p better to 622p.

Among blue chips, Rolls-Royce put on 4p to 284.5p after ABN Amro raised its price target on the aerospace giant to 350p from 275p and urged its clients to pile into the stock. The Dutch broker is convinced that Rolls-Royce will enjoy significant growth over the next 20 to 30 years, having laid the foundations for this success during the past decade.

Egg ticked 0.75p lower to 108.5p as Numis Securities suggested that 115p a share is the top price any acquirer would pay for the internet bank. Egg stock soared last week as rumours circled dealing rooms that an offer for the company was imminent. Prudential has long been talked of as keen to offload its 79 per cent holding in the group. In fact, it spent a big part of last year trying to complete such a deal. Back then, the insurer was said to want 165p a share for its stake, a price viewed as too high by the likes of Royal Bank of Scotland and MBNA. Numis believes that without a takeover, Egg stock is worth about 90p.

Autonomy fell 13p to 218.75p as UBS cleared a large seller from the market. The Swiss broker is believed to have placed 8.6 million shares in the software group on behalf of Lazard Asset Management at 218p, with the bulk of the stock being taken up by the US fund manager Greenwich Street. Regent Inns ticked 2p higher to 79p as gossips talk of the pubs group as a desirable target for a private equity buyer.

Oil explorers were set alight by news that Dragon Oil, 9.75p higher to 107p, had received a takeover offer. Venture Production added 11p to 332p, Soco International improved 15.5p to 520p, Burren Energy rose 10p to 560p and Premier Oil firmed 3.5p to 610p in response. Dragon Oil is 52 per cent owned by Emirates National Oil Corporation (ENOC). Its main production and exploration interests are located in the Caspian Sea, offshore Turkmenistan. Last month, Dragon denied reports that Russia's Lukoil had agreed to acquire ENOC's shareholding.

Innovation Group ticked 0.5p higher to 35.5p on hopes that the stock operator Robert Bonnier has now sold the bulk of his holding in the software developer. Vague bid rumours surrounded Renold, unchanged at 45.5p. The maker of industrial chains is said to have a net asset value of more than 100p per share, a valuation underpinned by a large property portfolio. However, analysts pointed out that Renold's pension fund deficit is likely to deter possible buyers of the company.

Stanelco ticked 1p lower to 25p after unveiling the purchase of Biotec for $25m. The German group, which is controlled by Essam Khashoggi, the younger brother of the Saudi arms dealer Adnan Khashoggi, has a number of patents for use in the packaging industry where Stanelco is focused.

Premier Foods 328p (up 21.25p, 6.9 per cent). Buys Marlow Foods, the owner of Quorn, the UK's biggest selling meat substitute.

Minorplanet 2.75p (up 0.63p, 29.7 per cent). Says it is on track to break even within six months.

Maxima Holdings 157p (up 13.5p, 9.4 per cent). Boasts that its full-year profits are likely to come in ahead of expectations.

Oxford BioMedica 32.5p (up 1.25p, 4 per cent). Says it will licence its LentiVector gene delivery technology to Pfizer for research activities.

Elementis 49p (up 2p, 4.3 per cent). Names Edward Bramson as its new chairman in place of Keith Hopkins.

Ultra Electronics 814p (up 6.5p, 0.9 per cent). Wins $23m contract for battleship radios from the South Korean armed forces.

Alphameric 83.5p (up 3p, 3.7 per cent). The company is experiencing strong trading at both its leisure and hospitality division.

William Morrison 187.75p (down 3p, 1.6 per cent). Sells its N Ireland store portfolio to Asda.

Corus 43.25p (down 1.75p, 3.9 per cent). The steel maker is likely to lose its place in the FTSE 100 in tomorrow's review.

Bunzl 536p (down 7.5p, 1.4 per cent). The group is likely to lose its place in the FTSE 100 tomorrow.

Woolworths 34.5p (down 0.75p, 2.1 per cent). Baird cut its earnings forecasts on the retailer amid concerns about the slowing DVD market.

Minerva 269.5p (down 5p, 1.8 per cent). Sells The Criterion property in London for £112m.

Volex 80p (down 1p, 1.2 per cent). Unveils a £15.6m fund raising to finance the group's planned restructuring.

Aga Foodservice 304p (down 1.75p, 0.6 per cent). Buys Waterford Stanley for £8.7m.