Valuation: Neutral; 1690p three-pronged price target retained
Sentiment is very poor going into results – in-line could create a bounce. The shares are at 17x our 2011E earnings; 14x excluding the cash on the balance sheet.

But the thinking behind it throws up some interesting questions. BG is focused on three growth areas: the gas-rich coal seams of Australia; the giant oil fields in the deep water off Brazil; and shale gas resources in the American south and Midwest.

Now consider what China has been up to. Two weeks ago Sinopec, CNOOC’s sister company, paid $7.1 billion (£4.4 billion) for a minority stake in Repsol, the Spanish oil group that owns rights to the Brazilian deepwater fields.

Ten days later, CNOOC paid $1 billion for part of a giant shale field in Texas. Last year it signed a 20-year deal to take gas from BG’s coal-seam gas project in Australia. Maybe the rumour-mongers have a point.

The trick is for BG’s chief executive, Frank Chapman, to close the valuation gap between the price at which bankers think he would be willing to sell — call it £18 a share — and its current trading price of £11.67.

He may have trouble doing that by simply staying the course. If BG meets his rosiest projections, in a decade the company will be producing 1.6m barrels of oil and gas a day — up from an average 644,000 last year.

Making that leap depends on the tricky business of exploiting its vast resources deep under the ocean and in tight geological formations on land. BP has demonstrated the perils that await. Unsurprisingly, investors are nervous.

That would certainly give a bump to BG’s shares. As Chapman knows well, the best defence is a high share price.

In our view, in a worst case scenario, this issue might impact HSBC by US$2.5-5.0 billion pre tax

Sesa Goa H1 FY2011 results later today: We note that Sesa Goa, Vedanta’s 57.4% directly held iron ore business, is reporting later today.

· strong historic underwriting track record;

· clearly stated and successful growth strategy of prudent diversification and the pursuit of selective opportunities that lever its niche skills in complementary sectors and geographies;

· focus on attractive short tail niche lines of business;

· high quality underwriting teams and management, recently complemented by the opening of the new Singapore office; and

· prudent reserving policy.

The Board views the Proposal as an attempt to acquire the Company opportunistically, when valuations of listed Lloyd’s companies are at a cyclical low and to exploit the impact on Hardy of a series of exceptional international property treaty losses

The Board, having carefully considered the Proposal together with its advisers Rothschild and KBC Peel Hunt, was of the unanimous opinion that it significantly undervalues the Company and consequently had no hesitation in rejecting the Proposal

On the face of it the 3.1% rise in asking prices for houses in October seems completely at odds with the plethora of data and survey evidence indicating that the housing market is on its knees. And, of course, it is. But two points must be made:
1) The data are not seasonally-adjusted and asking prices tend to rise markedly in October as the autumn is normally a buoyant time for the housing market
2) These are vendors’ asking prices for house prices and not the price finally achieved.

Admittedly, some vendors (particularly those that are not under any form of pressure to sell) may hold out for some time in accepting a significantly lower price than they are asking for. And some vendors may not be prepared to accept the prices they are being offered and take their house back off the market.

We expect house prices to trend down relatively gradually over the final months of 2010 and in 2011 to lose around 10% in value. There is however likely to be significant volatility around this gradual overall downward trend. High (and likely to rise) unemployment, muted wage growth, an increasing fiscal squeeze, low consumer confidence, difficulties in getting a mortgage, a housing supply/demand balance currently firmly in favour of buyers and a house price/earnings ratio above long-term norms are a poor combination of factors for house prices. Low interest rates and the current stamp duty holiday for first-time buyers on all properties costing up to £250,000 only partially offset these adverse factors.

The fundraising materially strengthens Gulf Keystone’s balance sheet, enabling the company to accelerate activity across its portfolio, while also maintaining the financial flexibility to pursue value-added, bolt-on acquisitions in-country, should they arise. The addition of a third operated deep rig for Shaikan and two fully funded exploration wells on the non-operated blocks should maintain the pace of news flow over the coming 12 months. Ultimately, we expect Gulf Keystone to fall prey to a larger rival and today’s fundraising should ensure that shareholder value is maximised before exports restart and Kurdistan is opened up. To this end, we view it as a key step forward.

Upside in all restructuring scenarios
Successful tariff re-negotiation in our view offers over 15% share price upside and adds 10% growth to earnings from FY 2010 levels. In the event that National Grid is not successful in achieving an adequate US return, divestments should not be ruled out. Recent asset sales (Iberdrola, E.ON) suggest multiples that could offer up to 22% share price upside. Assuming that 100% of the US business is sold at 150% premium to rate base, followed by a buy back of £.8bn (at the current share price) could give 33% upside.

Valuation: Maintain our Buy stance, increasing our PT to 615p
We upgrade our price target by 50p/share to 615p, maintaining our Buy recommendation. Our valuation is sum of the parts derive