COMPANY NOTES
By CUSTOS
IT must be difficult for the layman to keep up with the stock market's vicissitudes. After dropping nearly 10 points at the end of last week the index of industrial shares rose' nearly. 6 points on Monday. A halt to the recovery was then called when the terms of the new Electricity funding loan became known, but when the gilt-edged market began to pick up, industrials followed suit and Tuesday closed with another 3-point gain in the index. On Wednesday, the start of a new Stock Exchange account, there was a further recovery in oil and industrial shares, but I doubt whether it is safe to follow it up. The new 4+ per cent. Electri- city loan 1967-69 at 98+ will appeal to the insurance companies with its high running yield of £4 1 ls. 4d. per cent.
My readers will be aware that for some time I have counselled investors not to run after the market. The best advice I can now give is-to name the shares which are worth buying when they come back to what I regard as a cheap level. To begin with, the `blue chips,' IMPERIAL CHEMICAL, would be attractive at 50s. They very nearly dropped to that price last week, but have recovered quickly to 55s. At 50s. the potential yield is 5 per cent. if the dividend is increased, as I anticipate, from 10 to 12+ per cent. METAL BOX dipped to 52s. 6d. and recovered sharply to 57s. 6d. The same argument applies. If the dividend is increased from 10 to 12+ per cent. on the doubled capital they would be very cheap at 50s., but as the earnings cover is better than that of ICI, I would "buy Metal Box at around 52s. 6d. ASSOCIATED pLECTRICAL has a still stronger earnings cover and its dividend could rise from 14 to 17+ per cent. The shares Would probably be cheap at 85s. to yield a poten- tial 4 per cent. in view of the long-term prospects. They fell last week to 82s. 6d., but are now 92s. 3d. Among oil shares, which speculation has made more danger- ous, BRITISH PETROLEUM, which slumped to 115s. ld. last week, would be attractive at around 110s. on the basis that the 1955 potential earnings could be 80 per cent, and dividends 25 per cent. A potential yield of 4+ per cent. would be reasonable for a growth stock in the oil industry. In the second class WIGGINS TEAPE, which has been depressed by its new issue, now return 5+ per cent. at 68s. 9d. on the dividend of 17+ per cent. paid for 1954. They have re- cently been as high as 73s. 6d. CITY OF LONDON REAL PROPERTY, which I have re- cently recommended, have come back from 53s. to 46s. to yield 4.3 per cent. on last year's dividend of 10 per cent. 1 expect an increase in dividend to 121 per cent., which would give a potential yield of 5.4 per cent.
I first called attention-to VITAMINS LTD. nearly two years ago when they were shares standing at Is. 9d. and yielding about 9 per cent. The company needed, I said, to build up its financial strength and when it did so its shares would not be returning so high a yield. Since then it has developed, remarkably both its manufacture of Bemax and other vitamin foods and its animal feedingstuffs (Vitameals). Concentration of the pharmaceutical products in the new fac- tory at Crawley has brought down manu- facturing costs, while turnover has gone ahead rapidly. Trading profits are now more than double the level of two years
i ago. The jump of nearly 75 per cent. in the profits for the year to March 31 reflects the increased turnover in all sections of the business, not to mention-the contracts it has for putting vitamins in the new national loaf. Finances are now quite satisfactory. One in three new ordinary hares were issued in 1953 at Is. 9d. and 150,000 prefer- ence shares last year at 20s. Permission is now being sought to increase the author- ised capital, which suggests another rights issue. Technical developments are well ad- vanced and if another issue is made it will probably be as productive as the last. Earn- ings last year were 43+ per cent. and the dividend was raised to 15 per cent. on capi- tal increased by the one-for-two bonus issue of last September. At 12s. 6d. the 5s. shares yield 6 per cent.
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