Gulf builder takes Costain stake

MARKET REPORT

Costain, the battered building group, could be the subject of a Kuwaiti rescue. As Robert Fleming reduced its share holding a little known Arab group has steadily built a significant stake. It picked up another 250,000 shares yesterday, lifting its shareholding to 7.53 per cent. Mystery surrounds its intentions. Nasser al-Kharafi, president of Mohamed Abdulmohsin Kharafi & Sons, a privately-owned building group, told Reuters: "It is just a good investment, really, especially as we are in the same business." Costain has not yet spoken to its new shareholder, thought to have yearly sales of more than £200m. The Kuwaiti interest immediately promoted speculation that a bid could materialise. The struggling UK group could do with a friendly hand. In 1991 the shares topped 200p. They have since been under intense pressure as trading deteriorated. Just before Kharafi started buying on Monday the price was down to 9p. It rose 3p to 14p. Earlier this year the shares moved ahead as Costain admitted it was in talks that could lead to a takeover. Last week the company said it had ended the discussions and intended to go it alone. It also said it had failed to sell its loss-making US coal business. Away from the Costain excitement the stock market indulged in one of its more frustrating habits; starting strongly and then fading into the red. At one time the FT-SE 100 index was up approaching 20 points. Despite generally good company results it closed down 3.6 at 3,047, reducing hopes that shares were beginning to reassert themselves ahead of a spring run. Turnover was the highest this year with Seaq putting volume at 858.8 million shares. Action stemming from the futures pits ahead of tomorrow's expiry of the March option series contributed to some of the volatility. Talk of big cash calls is also circulating. Scottish & Newcastle, thought to be on the verge of last clinching the deal to buy Courage, the UK's second largest brewer, is one candidate. Rolls-Royce is another. The aero-engine group has made no secret ofits need to make a cash call to help finance the takeover of the US Allison engine business. Henderson Crosthwaite expects a placing or rights issue close to one-for-five at 145p. Lucas Industries, the vehicle components group, had another top-gear session, advancing 8p to 198p. The £1bn deal with Volkswagen to supply fuel injection systems continues to encourage sentiment. Interim figures are due on Monday and about £42.5m (against £19.6m) is expected. The group's warrants were again drawn higher, rising 5.5p to 26.5p. If fully taken up they could produce £120m for Lucas when they expire in June. They contain the right to buy a share at 172p. Vodafone, the mobile telephone group, attracted attention as it became the subject of a new-style equity repo market. Stock was borrowed directly between market-makers, in effect cutting out the middle player. Turnover was put at more than 13 million shares with the shares up 4p at 199p. BAA, the airports group, jumped 15p to 440p following the Department of Trade's decison to leave the charges programme for UK airports largely unchanged to the year 2002. Allied Domecq, the drinks group, fell 1p to 504p following an in-line trading statement. The group is due to meet analysts soon. Granada, another group with the analysts in its corporate diary, put on a further 13.5p to 526.5p. Builders were firm, encouraged by an upbeat chartered surveyors report and hopes that interest rates will at least remain unchanged. Electricals were mixed although Northern Electric gained another 32p to 821p as the Trafalgar House saga continued with the predator still anxious to make its lower offer. Land Securities, off 7p at 587p, reflected a rumoured Cazenove downgrading; Inchcape fell a further 4p to 300p with Kleinwort Benson said to be cautious. Asda continued to find support, edging ahead 0.25p to 71.5p. Societe Generale Strauss Turnbull ratesthe shares a buy. Scotia, the drugs group, held at 350p as Hoare Govett placed 1.5 million shares at around the market price. Coal Investments put on 5p to 84p. Nicholas Berry's Stancroft Trust lifted its stake to 16.7 per cent, buying 3.2 million shares. SEET, the textile group where the Stevenson family has acquired a 25.34 per cent interest, rose a further 8p to 66p. Ocean, the transport group, edged 3p higher to 270p on talk of a disposal; Domestic & General, the insurance group, continued to suffer from disappointing figures, off another 33p at 1,330p.

Danka Business Systems fell 13p to 380p on worries it is preparing a significant take-over. Possible targets MR Data Management and Southern Business gained 2p to 111p and 1p to 63p respectively. Newport Holdings, an obscure property group that came to the stock market a year ago at 100p a share, has attracted the attention of Berkeley, the builder of up-market houses. As the result of a property deal Berkeley has acquired an 8.5 per cent shareholding in Newport which is an active property trader. Its shares were unchanged at 93p. The shares have been as low as 65p. Hambro Countrywide, the 750-strong estate agency chain, should return to profits this year, believes Smith New Court. The securities house is looking for £5.2m, with £16.5m pencilled in for next year. Key to the advance are the 300 branches acquired fromNationwide. The sharp increase in outlets should give Hambro more clout with mortgage lenders and insurers. The shares held at 27p.