Reasons to be neutral


304.25p +0.25p


1,015p +6p

THE neutral reaction of the stock market to Scottish insurance major Standard Life's interim results yesterday was about right, for two reasons.

One was the curate's egg of the performance, and the other was that the shares have had such a decent run since the group's flotation just over a year ago that even most of yesterday's good news was already in the price.

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On the one hand you had an impressively robust performance from Standard Life's core UK life and pensions arm, where profits leapt 70 per cent on a 45 per cent jump in sales to within an ace of 7 billion.

As has been the case for the past couple of years under chief executive Sandy Crombie's strategy, the move into higher-margin profit areas such as self-invested personal pensions and away from the tarnished with-profits sector has paid off in spades.

Profit margin rather than volume has been the mantra under Crombie for long enough now for it no longer to need the epithet "new".

And in the first six months of the year, margins have moved ahead again, from 1.4 per cent to 1.6 per cent. The indication from the company is that there is more to come in the margin arena.

Standard's investment management business under Keith Skeoch was also an eye-catcher, with profits up more than 40 per cent. Perhaps as important in the broader sweep of things, SLI is making increasingly good inroads into third-party management of funds rather than just being spoon-fed goodies by Standard's life and pensions business.

Nearly a third of the division's assets are now from third parties, such as pension trustees and big financial organisations. That figure was a much lower 10 per cent a decade or so ago.

But the City also picked up on the less impressive aspects to the results yesterday.

Lapses of policies at Standard are still running above assumptions, and further provisions against this are likely at the full-year stage.

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Standard Life Bank had a lacklustre period, as interest rate rises bit into its raison d'tre mortgage business.

Canada was relatively flat, while mainland Europe profits suffered by the strong comparator of the first half of 2006.

And the fledgling Standard businesses in Asia-Pacific are still in the red. Taken in the round, therefore, the general picture was mixed - and Standard's shares trod water at 304.25p yesterday.

The market's coolness is probably also a result of some profit-taking on earlier gains for the stock.

Floated at 230p in July 2006, the shares touched 349p earlier this year, but they still seem to have the overall sentiment of the market with them.

SUFFOLK brewer Greene King, one of the biggest regional drinks groups in Britain, has earned an enviable reputation in the stock market for several years of being a "safe pair of hands".

Acquisitions, like Belhaven Breweries in Scotland, are smoothly integrated; organic growth moves steadily upwards; the brewing/tenanted pubs/managed pubs business model, eschewed by many of its competitors, progresses with barely a ripple on the water.

GK's latest trading statement won't derail the City's belief in the group.

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GK said its profit expectations for the full year remained unchanged despite the horrendous British "summer" that saw the worst flooding in decades and beer gardens deserted.

For the managed and tenanted pub divisions to show low-single-digit growth despite the totally unhelpful backdrop will just add to the company's image of reassuring and capable sangfroid.

The statement was not positive enough to spark a flurry of broker earnings upgrades, but that so often is not the point of GK.

It does not come in dramatically better than the market is expecting, but it only actually disappoints once in a blue moon.

And with the stock market in a state of general volatility, that quality is increasingly appreciated.

GK has the medium-term credentials to be a solid part of any institution's defensive portfolio.

Oh, and the smoking ban, which had already been a factor for its Belhaven subsidiary but was extended to its English territory this year?

GK said it had proved a relative success in its pubs, while its own-brewed beer volumes, the likes of IPA and Abbot, have risen 10 per cent.

Situation normal, in fact.

Playtech revenue climbs back to levels before US ban


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ONLINE gaming software firm Playtech reported an 80 per cent rise in total non-US revenue yesterday and said income was almost back to where it was before last year's ban on internet gambling in the US.

The firm said revenue for the six months to 30 June jumped to $44 million (21.8m) from $24.5m, only $2.2m away from the $46.2m reported a year ago that included US revenue. Casino revenue was up 53 per cent to $32.6m, while poker revenue leapt to $10.5m from $2.8m this time last year, boosted by the migration of the Tribeca licensees onto Playtech's platform.

Chief executive Mor Weizer said: "The group has further strengthened its foothold through the development of its relationship with existing licensees and through gaining additional licensees, as well as developing products specifically aimed at the Asian markets.

"Playtech has a very healthy pipeline of new business for the second half of the year and we look forward to making continuing strong progress."

The group said finance director Shuki Barak had asked to leave the board for personal reasons. The interim dividend is 6.1 cents per share.

SMG sheds 11% after unnamed investor offloads 13.2m stake


ON A day when Scottish companies generally were on the front foot, SMG was one of the biggest fallers, down 11 per cent.

The drop came after stockbroker Goldman Sachs announced it was selling a stake in the media company worth 13.2 million, without identifying who commissioned the sale. SMG's shares lost 5p to 40.5p.

John Menzies, the news distribution and air cargo handling group, also retreated after reporting a 22 per cent drop in pre-tax profits for the first half after its distribution arm was hit by lower newspaper and magazine volumes. The shares closed 4p lower at 564p.

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Banks continued their recovery despite the continued worries over subprime lending.

HBOS was up 12.5p to 905p, while Royal Bank of Scotland gained 3.5p to 583.5p.

Ardana was unchanged on 98.5p after the drug discovery company said it had received positive preliminary results in a study for its prostrate cancer treatment Teverelix Long-Acting.

One of the top gainers was among the smaller to medium-sized companies - J Smart rose 62.5p to 925p.

BoE statement despite steady rates


THE Bank of England could issue its first statement alongside a decision to leave rates unchanged in more than eight years tomorrow, so it can finally relay its view about the liquidity squeeze hitting the UK financial system.

Under normal circumstances, the central bank would only issue a statement if there was a change in borrowing costs or its decision to leave them on hold was a surprise. However, turmoil in the credit markets means many market players are calling for the bank to clarify whether its policy has changed since the August Inflation Report.

"If there was ever an occasion the MPC might release a statement to accompany an expected 'no change' decision then it is this week," said George Buckley, economist at Deutsche Bank.

China Real Est's


716.5p +2.5p

Scotsman says BUY

WITH investors and commentators panicking about property values and their financing, it may be odd that we continue to focus on property funds.

However, as always, investment is rarely black and white.

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We would concur that property values in some parts of world are at unsustainable levels and over-leveraged. However, in other areas, principally in emerging markets, values are modest and increasing.

The principal differentiator is the lack of substantial borrowings - much is financed through traditional equity.

China Real Estates Opportunities Fund, an AIM-listed investment company managed by a firm called Treasury Holdings, is one such fund.

China investments are generally recognised as offering very attractive risk-reward characteristics and appear to be little correlated with other asset classes.

In addition, property remains cheap; for example, Shanghai office space was valued at 60 per cent discount to similar property in Hong Kong.

Its economy continues to grow at above-average rates and is funded to a large extent internally.

Indeed until fairly recently, direct foreign investment in China was severely limited.

The fund was launched at the start of 2006 to invest principally in retail and office property in the major tourist and business zones - to date it has focused on Shanghai.

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There is a massive undersupply of suitable property with increasing demand, mainly from a migration to urban areas.

The fund is now fully invested in a very concentrated portfolio of seven properties. However, it retains some 5 per cent in cash for contingencies.

A similar size acreage close to its largest property was recently sold at an equivalent valuation of three times the current carrying value.

• This article is for information and discussion purposes and does not form a recommendation by the manager to invest or otherwise.


1,333p +34p

Broker says BUY

KAZAHKMYS raced ahead after the miner reported a better-than-expected 24 per cent rise in first-half profits, prompting UBS to reiterate "buy" advice and its 1,450p price target.

The group also announced a special dividend of 50 cents a share alongside news of a further share buyback of $400 million (198.5m). Profits before tax for the six months to 30 June hit $1.19 billion, up from $955.9m a year earlier, driven by steady copper cathode production and buoyant commodity prices.

Lloyds TSB

548.5p +1p

Broker says HOLD

LLOYDS TSB rose despite a Merrill Lynch downgrade to "neutral" from "buy" as the broker adopted a more cautious approach to the bank's wholesale business.

It also noted slowed asset growth for the company and said the firm had no further to move.

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Last month, Lloyds TSB posted a 15 per cent rise in interim underlying profits before tax to 2.01 billion on revenues up 8 per cent at 6.6bn, and its first dividend increase in five years.


1,985p +56p

Broker says BUY

ROYAL Dutch Shell was ahead after a UBS upgrade to "buy" from "neutral" with the price target kept at 2,300p.

The broker said the recent weakness in global stock markets had seen shares in the oil major drop to prices that indicated attractive upside potential. But the target price remained unchanged as a result of caution about the valuation of the group's long-life and unconventional projects.