Market Report: AB Foods should chew over a name change

Associated British Foods is going to have to think about a name change before long. The group's Primark discount clothing brand is growing rapidly and already counts for 25 per cent of profits, and yesterday's deal with BP and DuPont could deliver blockbuster long- term results from the biofuels industry.

The deal, although unlikely to add anything to the bottom line this year, will see AB Foods combine its ingredient resources with BP's fuel refining and DuPont technology to produce biobutanol, which has an energy content closer to petrol than ethanol and gives better fuel consumption. House broker Panmure Gordon believes that if the initial deal is successful it could lead to greater development for the Wissington plant, currently under construction, and significant growth prospects with "two world-class partners".

Global markets have enthusiastically welcomed companies offering alternatives to traditional fuels, and some traders feel that the move by AB Foods could lead to a re-rating of the shares. UBS also reiterated its "buy" recommendation on the shares, which closed 15p better at 731.5p.

There was a strong market in Cairn Energy, despite reports that the company may shelve plans to demerge its Indian business, depending on the oil price and market conditions. The plans were announced in April, but since then the company has given the market no updates, and the Indian stock market has tumbled in line with other emerging markets. Cairn closed 14p firmer at 1,934p.

Activity in the wider market was light, with Royal Ascot taking its toll on trading volumes. After a dull start that saw the FTSE 100 47.4 lower in mid-morning, the index recovered its losses by the afternoon and closed 6.8 better at 5665.

Elsewhere in the blue- chip index, online gambling stock PartyGaming continued its recovery since two former directors placed 200 million shares in the market at 116p a fortnight ago. Dealers said that investors were buying back into the stock in the belief that US legislation to ban online gaming is looking unlikely to gain Senate approval. The shares added 3.75p to close at 119.25p, while rival888 Holdings failed to attract support, closing 1.5p weaker at 194p.

Second-line real estate groups were out of favour as investors sold stock in Great Portland Estates on news that the group has sold its interest in the Tooley Street development in central London. Despite banking a profit of £7.7m on the deal, investors took profits and sent the shares 15.75p lower to 463p. Rival London property developer London Merchant Securities shed 4p to close at 192p, while the UK's largest landlord, Land Securities, fell 28p to 1,744p.

The telecommunications retailer Carphone Warehouse was also unloved as investors began to fret over increasing competition in the home broadband market. Anecdotal evidence suggests that potential customer are being put off Carphone's "free" broadband offering because of poor customer service, and investors are concerned about the number of new entrants in the market, many with better "pulling power" than Carphone. With O2 buying the retail group The Link, as well as BSkyB and Orange poised to enter the fray, traders are becoming increasingly sceptical about Carphone's first mover advantage. The shares lost 11.5p to 319p.

The star performer in the small caps was CCH International, as profits soared at the Sharia-compliant trade finance house. The group has funding of about $240m (£130m) available to its clients, and reported a jump in pre-tax profits to £689,554, almost 19 times higher than in 2005. The numbers sent the shares into orbit, climbing 16.1p to 21.5p, a gain of more than 300 per cent on the day.

There was a strong market in biotechnology group Proteome Sciences, as rumours did the rounds that the US groups Abbott Labs or ABI are poised to take a major stake in the business that may lead to an offer being made for the company. There has been talk that Proteome is running low on cash, but traders speculated the stake would be bought at a "significant" premium to the current price. The shares rose 5p to 52.75p.

Heading in the opposite direction was Genosis, the manufacturer of home fertility testing kits. The stock has disappointed investors since coming to the market at 116p last December, and tanked another 13.5p to close at 20p. One investor took a hefty loss yesterday by selling more than 227,000 shares at 10p.

The construction services group May Gurney had a good start to life as a public company, raising £44.1m in a placing on AIM at 186p per share by the broker Altium Securities. The shares closed at 206.25p, a 10.9 per cent premium to the placing price, giving the company a market capitalisation of £146.4m.