NATIONAL Grid Transco (NGT) settled at a four-year high as a leading stockbroker cited the electricity network and gas pipeline operator as its favourite UK utility.
The £16 billion group enjoyed a strong rally in its shares in the second half of last year as it agreed the £5 billion sale of four of its local gas pipelines. The deal is expected to be completed this summer and prompt the return of £2 billion to shareholders through a special dividend. That momentum has been maintained so far this year and accelerated yesterday as Credit Suisse First Boston repeated its outperform stance.
The Swiss broker thinks next year’s regulatory review, on which Ofgem is expected to make its initial statement this summer, will enable NGT to make a return on its UK regulated assets in the next review period greater than its cost of capital. Further, it suggests, growth demand in the US, the home of its Niagara Mohawk business, remains robust, despite another mild winter in the US that will suppress electricity volumes in the present financial year. Finally, Dominic Nash, analyst, calculates that the forthcoming 65p special dividend will boost earnings per share by 12 per cent. With the broker raising its price target from 550p to 593p, NGT added 10½p at 544½p.
The FTSE 100 pushed on to a new 32-month high, up 17.1 at 5,058.9.
Tate & Lyle rose 9½p to 506p as ABN Amro raised its recommendation from hold to add with an increased 560p price target, citing the sugar refiner’s recent focus on higher-margin products. Scottish & Newcastle improved 3¼p to 459¾p on strong full-year results and the announcement of a chunky €100 million (£69 million) dividend by Baltic Beverages Holding, its Russian beer joint venture with Denmark’s Carlsberg.
Advertisement
But it was Cable & Wireless, up 3¼p at 133¼p, which took the top slot among blue chips on resuming its share buyback programme for the first time since last month’s third-quarter trading statement.
Standard Chartered eased 9½p at £10.06½ as Keefe, Bruyette & Woods repeated its underperform recommendation ahead of today’s full-year results, citing its belief that revenue growth in the second half of last year would be below the first half. HSBC advanced 4p at 906½p on being chosen by Deutsche Bank as one of its top European banks. However, the German broker dropped Royal Bank of Scotland, off 10p at £18.23, from its list of preferred stocks after its recent strong share price performance.
Diageo added 8p at 751p as Lehman Brothers repeated its overweight advice in the belief that tomorrow’s interims could beat forecasts.