Market report: Tuesday close

CITY folk are bullish about the media sector's prospects in 2004. The relaxation of rules over ownership and hopes for a recovery in advertising revenue on the back of this year's US Presidential election, the Olympics, the London mayoral election and the European football championship in Portugal have put them on investors' shopping lists.

But US securities house Goldman Sachs reckons investors should choose carefully.

It has downgraded some of the sector leaders from in-line to underperform, including Financial Times owner Pearson, down 5 1/2p at 647p, Reed Elsevier, 5 1/4p off at 476p, and radio broadcaster and magazine publisher Emap, down 8 1/2p to 946 1/2p.

But Goldman remains bullish on prospects for satellite broadcaster BSkyB, up 7p at 772p, music publisher EMI, 6 1/2p cheaper at 219 3/4p, and advertising giant WPP, 1p lighter at 632 1/2p.

Media analyst Lorna Tilbian at rival broker Numis Securities reckons this will be a year of recovery for the media sector and says investors should focus on sub-sectors which provide the greatest recovery potential. 'We believe broadcasters and trade journals satisfy these criteria the most,' she adds.

Broker UBS is bullish about Emap and raised its target from 840p to 1025p, impressed by improving profits from radio and the outlook for advertising among its trade journals. Deutsche Bank has moved Emap from 890p to 1030p.

Share prices generally came off the boil following yesterday's gains. Without any clues from Wall Street, closed yesterday, the FTSE 100 index fell 18.8 points to 4499.30.

Broker ABN Amro has picked a dozen small-cap companies that it expects to do well in 2004. Those marked better on the back of it included Aggregate Industries, 1 3/4p to 86 1/4p, Galen Holdings, 20p to 780p, Cairn Energy, 27 3/4p to 580p, and Kidde, 1 1/4p to 99 3/4p.

A profits warning left British Vita nursing a fall of 14 3/4p to 255p. The polymer technology specialist expects profits for 2003 to come in at the lower end of expectations. Profits at its non-woven business were overstated by £5m.

Broker Credit Suisse First Boston has upgraded the property sector from underweight to overweight and says it should benefit from the introduction of real estate investment trusts (Reits). These will boost companies' earnings by reducing the amount of capital gains tax paid when they sell any of their holdings.

Those most likely to benefit are Land Securities , 4 1/2p firmer at 1017 1/2p, Slough Estates, up 2 1/2p at 437 3/4p, Minerva, off 1/2p at 229 1/2p, and Freeport, down 1p at 423 1/2p, which have all been raised to outperform.

CSFB has also raised its price target on Liberty International, off 5p at 671 1/2p, from 645p to 685p, and British Land, 6p higher at 607 1/2p, from 585p to 655p. It has downgraded Chelsfield, 2 1/4p cheaper at 305p, Brixton Estates, up 2p at 282p, Great Portland, 1/4p better at 236p, Ashtenne Holdings , unchanged on 310 1/2p, Quintain, 3p worse at 359p, and Benchmark, 1 1/2p lighter at 255p, to underperform.

Over on the Alternative Investment Market, shares of Pnc Telecom returned from suspension unmoved on 2 3/8p following details of a boardroom reshuffle.

It was also the first day of trading on AIM for drinks supplier Blavod Black after a placing by broker Evolution Beeson Gregory at 24 1/2p, raising £10m. The price touched 42 1/2p before settling at 37 1/2p.