BG Hits New Heights as Growth Gains Pace; MARKET REPORT

The Evening Standard (London, England), January 6, 2006 | Go to article overview

BG Hits New Heights as Growth Gains Pace; MARKET REPORT


Byline: MICKEY CLARK

MARKET REPORT

PREDICTING the price of liquefied natural gas during the past few years has been a matter of luck rather than judgment. Just ask US broking house Morgan Stanley. It freely admits it does not have the slightest idea how you should go about forecasting the performance of this rapidly growing market.

As a result, price targets and net asset values have followed, not led, BG shares upward to record levels.

The two main reasons for this lack of clarity are the fast-growing market and the inability of traditional valuation metrics to capture this growth. In other words, if you do not know where you are starting from, it becomes difficult to draw a conclusion.

Shares of BG have been one of the Footsie 100's better performers since the start of 2005, coming up from a low of 346p. They are currently hovering around 600p, so Morgan Stanley has chosen to jackup its 12-month target price from 520p to 650p, suggesting they still have further to run.

Its new price target gives a premium of 29%, reflecting the difference between growth strategy and delivery. In the meantime, it looks as if gas prices will be driven higher in the short term despite the apparent resolution of the dispute between Russia and Ukraine.

The booming stock market means lucrative times lie ahead for the professional investors, including those that enjoy a quote themselves. That is a message that has already dawned on people with money to invest. Helping to lead blue-chips higher yesterday was fund manager Amvescap, with the help of comments from Deutsche Bank which sees potential in the proposed restructuring of the group. Chasing Amvescap higher was the UK's biggest hedge fund operator, Man, closely followed by Foreign & Colonial Asset Management.

Broker Investec has repeated its strong buy recommendation and 368p target price on Sportingbet.

The online gambler's first-quarter update at the end of November made impressive reading, and Investec subsequently raised its pre-tax profit forecast for the year to July 2006 by 8% to [pounds sterling]97.2 million and for 2007 by 12% to [pounds sterling]118.8 million. The profits growth has been driven by the flow-through from the group's recent acquisition Paradise Poker, its cyber casino operations and the benefits of higher sports betting turnover. …

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