Company Notes
By CUSTOS A FEATURE of the generally firm markets on the Stock Exchange this week has been the ebullience of oil shares under the lead of ANGLO-IRANIAN and BURMAH OIL. The meeting of American oil magnates at Britannic House to discuss the marketing of Persian oil fired the imagination of the bulls who began to envisage the disposal of the . Government's oil shares, the carving up of the Persian melon and the final hand-out by Burmah Oil. This, of course, is going much too fast. I have often recommended Burmah Oil at much lower levels and for the ,long view they may still be worth buying at 75s. When Anglo-Iranian touch £11, as they did on Tuesday, this makes Burmah's holding of them worth 58s. per Burmah Oil Share, and when Shells are £5, as they are today, this adds on 10s. Thus, at 68s. for the current value of its principal invest- ments, the market is valuing Burmah's trading assets in India at only 7s, a share to yield 84 per cent. on last year's profits. However, the speculation in Anglo-Iranian makes Burmah Oil shares risky to buy at the moment. The cautious investor should wait for a quieter time.
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THE industrial recession of 1952 and the loss of exports due to the import cuts in Australia and New Zealand hit HOOVER LTD: very hard but its recovery in 1953 was truly remarkable. Turnover was nearly 20 per cent. greater than the previous record in 1951. A feature-of the sales expansion was the success of its new washing machine. Total sales of washing machines were nearly double those of 1951 and 50 per cent. higher than those of 1952 and now exceed the sales of cleaners and polishers on which the company built up its reputation. The com- pany is constantly introducing new machines and last year introduced a revolutionary electric steam and dry iron. The manage- ment of the company must be one of the most efficient in British industry but I
thought the chairman over-stressed the incentive effects on management efficiency of the dividend on the £80,000 " A " shares which are mainly held by the senior executives. Under a profit sharing scheme in the company's articles the dividend on the " A " shares rose from about 11d. to 3s. 8.7d. per share (i.e., from 914 per cent. to 3724 per cent.) while the dividend 'on the £1,870,000 ordinary capital was raised from 25 per cent. to 45 per cent. At 33s. 9d. the 5s. ordinary shares yield £612s. per cent., which is fair enough. As the company manufactures durable consumer goods, which are most vulnerable to a trade reces- sion or export slump, the shares should return more than the average.
A CORRESPONDENT having read my note on Indian tea equities, has written to say that Ceylon tea preference shares might be safer and more attractive. I am afraid I cannot agree. I do not know whether the Indian Government will impose any fresh tax on foreign companies in its forthcoming budget but it is not anti-capitalist. On the other hand, the Ceylon Government is not at all friendly to tea growers. It has limited their exports and when under pressure it recently relaxed and allowed an additional amount for export the Minister concerned made the peevish remark that this would depress tea prices and make them worse off. The truth is that tea will probably hold its present price until the new Indian crop comes into the auction rooms in' the autumn. So I prefer Indian tea companies to Ceylon and the equity shares to the preference (unless there are arrears of dividend). While the. preference shares can only rise a limited amount, because preference dividends are fixed, the equity shares can rise to the extent demanded by the size of the variable divi- dend. And the forthcoming dividends will be governed by the profits on the present high price of tea.
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