10 MAY 1946, Page 22

FINANCE AND INVESTMENT

By CUSTOS

IF anybody stillā€¢ doubts the underlying strength of the stock markets, he can scarcely fail to be impressed by the performance of the past week. From Paris and Washington the news has been of the kind which normally would be judged bad enough to cause many investors to prefer cash to stocks and shares and bring a fairly substantial fall in prices. That nothing of the kind has happenedā€”apart from a moderate setback in leading tobacco' sharesā€”is pretty conclusive proof that investment sentiment is " bullish." Even the uncertain- ties surrounding the American loan have merely put a brake on enthusiasm without causing anrreal apprehension, although it seems Clear that if the loan is refused Mr. Dalton will introduce a sup- plementary budget-and Britain will have to tighten the belt. This is, in short, an inflationary market and it would be foolish to predict a genuine reversal of trend at this stage.

R. M. & E. D. PAYMENTS

Shareholders in the R.M. and E.D. Realisation Companies, whose prospects I have discussed in- a favourable light on several occasions in the past, are now to receive further liquidation payments. In the case of R.M. 7s. 3d. a share is to be returned, and E.D. shareholders are to get 2s. 9d., both these distributions resulting from the recent sale of Anglo-Foreign Properties. So far as E.D. Realisation is con- cerned, the 2s. 9d. payment will practically bring matters to a close, total distributions having reached 20$. 9d. There will still be a few small assets to be disposed of, but the total proceeds will not be expected to yield much more than a few pence per share. Th: market is therefore right in quoting E.D. around 2s. 9d.

The R.M. position is sqbstantially different in that after the pro- posed distribution of 7s. 3d. has been made there will ,still remain the holding of 138,000 " B " shares in the O.S.N. Realisation Company, a valuable asset which in due course should fetch a good price. If one deducts the 7s. 3d. from the current market quotation for R.M. of 13s., the balance of 5S. 9d. on the i,000,000 Ex shares puts a market value of 4287,500 on the O.S.N. holding, or, in other words, it values the O.S.N. " B " shares at just over Ā£2 each. The O.S.N. position is a complicated one, depending on the ultimate disposal of a large block of Cunard White Star shares, but it will be surprising if anything less than Ā£3 a share is received if this asset is carefully nursed. E.D. Realisation shareholders will now see things through and await their cash payment. A similar policy _ may be recommended to holders of R.M.

RICHARD COSTAIN POSITION ā€¢

Since I referred to the prospects of Richard Costain LI Ordinary shares a month ago this company has issued its full accounts for 1945. As I predicted, trading profits showed a substantial increase from Ā£129,826 to Ā£192,751, and the Ordinary dividend has been increased from 8 per cent. to ro per cent. The position has also been clarified to some extent by the inclusion with the report of a consolidated profit and loss account. The figures show that consolidated earnings on the Ordinary capital, which have not yet fully reflected the effects of the refinancing of .the Dolphin Square subsidiary, amounted t.ā€¢ just under 24 per cent. The no per cent. 'distribution was therefore conservative, and on the assumption that gross profits can be main- tained or increased, 'there should be scope for gradually increasing Ordinary dividends. At the annual meeting Mr. Richard_ Costain took a hopeful view of the current year's outlook without glossing over the uncertainties which had been created by Government policy- While the Costain organisation stands ready to play a big part in housing development, the Government's attitude is' anything but helpful to private enterprise. I still feel, however, that the public works contracting side of the business, along with the improving position of the Dolphin Square subsidiary, will yield satisfactory results and that the Ordinary shares will provide a sound investment. Quoted around 44s., the yield is about 4 per cent on the to per cent. dividend and about to per cent. on earnings.