COMPANY NOTES
By CUSTOS
AFTER a further recovery the market in industrial equities has boiled over. Throg- morton Street has become, like Wall Street, 'selectively' inflation-minded, that is to say, buying is concentrated on a few shares or trades which are considered good 'hedges' against inflation, while the rest is neglected. My own preference has been, as my readers know, for oil, steel and ,paper shares, and these have been prominent in the recent rise. Oil shares in particular are enjoying an international boom, for BRITISH PETROLEUM, ROYAL DUTCH and SHELL are dealt in as actively in New York as in London. Under the pressure of American buying Shell have actually touched 180s. (against 146s. a month ago), and British Petroleum 147s. 6d. (against 112s. 6d. in mid-April). Among paper shares the market was disappointed with the dividend of E, s. & A. ROBINSON, but delighted with the report, dividend and new issue of ALBERT E. REED. The latter's net profits are 13 per cent. up and the final dividend at 15 per cent., making 25 per cent. for the year, was 2+ per cent, more than the market expected. Earnings amounted to about 87 per cent., covering the dividend nearly 3+ times. To finance the capital programme the shareholders are being offered one new share of each class at par for every two held. Before this issue was announced the ordinary were quoted at 96s. 9d. and the 'A' at 95s. Each rose 7s. before reacting 2s. to finish 5s. up on the day. The directors hope to pay 16 per cent. on the increased capital, so that the shares around 100s. would yield 5+ per cent. This is attractive for a 'growth' share of this quality in the expanding paper industry.
* * The agency which incorrectly announced the BRITISH PETROLEUM dividend as 20 per cent, tax free instead of 15 per cent. tax free will no doubt be right next year or found to err on the right side. For the remarkable growth shown by the company last year is still continuing. Group sales were up by 15 per cent., gross profits by 18 per cent. and net profits by no less than 165 per cent.—from £17.4 to £45.3 million. Earnings on the equity capital came to 45+ per cent. tax free, so that the conl: pany is only distributing a third of .its profits. This is unduly conservative seeing that much of its capital expenditure was met by payments received (about £33 an' lion) from the members of the oil con' sortium in which it has a 40 per cent; interest. The company also receives i2) million from the Iranian Government over ten years and a royalty of 10.6 cents per barrel on Iranian oil exports until £51' million has been paid. Iranian production rose to 112 million barrels last year and will be 50 per cent. higher this year. TP, company also has a 23f per cent. inter in the Iraq Petroleum Company, whose, production was 236 million barrels year, and a 50 per cent. interest in inc, Kuwait Oil Company, whose output WL'' 384 million barrels. There is no doubt that British Petroleum is the Crcesus of ititi Middle East, owning about 28 per cent. t!' Its total oil reserves. It has more oil '1 ,1 reserves per £1 of market price than any other oil company in the world. The WI; dend yield at the present market price 0' 144s. 6d. may be only 3.85 per cent., bui American oil standards an earnings Yie' of 12 per cent. is comparatively high for 3 company with such. an astonishing rate °` growth. The investor must not, of course forget the political risk which at the mottle° seems less acute.
Once again it is necessary to add a posh script to comment on BRITISH PETROLEO:s that BURMAN OIL are relatively cheap. :1,11,1,,, is because the shares are not quoted in 1.4„0 York and do not yet interest the Amerino'e Investor. At present market prices the ‘T!Li of the company's holdings of Britlsii Petroleum and Shell is 102s., so tnat„t, 93s. 3d. Burmah Oil are selling at a , c. ount on their break-up value as an ";:i investment trust with their Indian a„ , ",, Burmah business thrown in for nothaill The final dividend is due this week and, if must not anticipate it except to say that. , should be increased. It may help the its vestor to value Burmah Oil if he remembero that each share represents 0.648 of ,0° British Petroleum and 0.59 of one Shell'
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