13 MARCH 1953, Page 27


By CUSTOS IN face of profit-taking and some indecision here and there, the stock-market has behaved surprisingly well during the past week. The death of Marshal Stalin and Mr. Malenkov's succession and his state- ment of policy caused scarcely a tremor ; and General Neguib's latest outburst and the shooting down of the Thunderjet in Bavaria have had little noticeable effect on prices. With the Budget and the South African election only about a month ahead, a pause for consolidation might have been expected. While some stocks have eased, however, others have risen : and where sales have been made, there has been a substantial volume of reinvestment. The general tone has been set by gilt-edged, and this market gives an impression of being managed with remarkable skill. A feature in the early part of the week was the large number of small buying orders for War Loan and other undated and long-dated stocks. These• orders, it would seem, were the outward consequences of further withdrawals of Post Office Savings. The markets have not yet been darkened by the advancing shadow of the Budget, the reason, no doubt, being that, while the Chancellor cannot give concessions to everybody he is unlikely to be harsh to any. One guess—that there will be some tax relief for industry—seems to be a fair inference from Mr. Butler's recent utter- ances in Washington. Dealings for new time" in advance of the new account, which opens on Wednesday, may provide a clearer guide to the immediate future of the market.

Bradford Dyers' Possibilities When the Bradford Dyers' Association interim dividend was reduced from 4 to 3 per cent. last July, the directors said they had been influenced by the substantial fall in earnings during the half-year to June 30th and by the uncertain outlook. After this warning the 1952 results are better than I expected. Had it not been for a drop of £666,471 to £1,084,064 in the profits from trading in this country, the group earnings before tax would have been substantially unchanged, since the overseas earnings were only £28,861 lower at £1,032,901. Net group earnings, after depreciation, tax and outside interests, are down from £791,237 to £492,222, and the Ordinary distribution for the year is reduced from 121 to 10 per cent. The dividend seems to be ultra- cautious, since the payment is covered 3.6 times by the net group earnings. In the light of these results I am surprised that the £1 Ordinary are still only 25s. 9d. cum about 9d. net dividend. At this price they offer the generous yield of 71 per cent., with possi- bilities of appreciation in a reasonably favourable market environment.

A Good Bank Share For each of the past twelve years the Bank of London and South America has paid a 6 per cent. dividend on its £5,050,000 of issued capital. In every one of these years the 6 per cent, payment has been covered by a very ample margin of earnings, and for 1952 the available net earnings, struck very conservatively after making all the necessary provisions, were 14 per cent. It seems to me that here is another instance in which shareholders have a strong case for expecting a little more. This bank, whose main business is with South America, has built up a strong position and now dis- closes a published reserve of £3 million, or nearly 60 per cent. of its issued capital, quite apart from its very large hidden reserves. I shall not be surprised, therefore, if, assuming conditions are reasonably well maintained, the directors see fit to raise the dividend for 1953. A hopeful pointer towards that possibility is the good wheat and maize crops in prospect this year in Argentina, for favourable harvests should provide the basis for better trade in that country with which the bank transacts a substantial proportion of its total business. At one time in 1951 Bank of London and South America £5 shares stood as high as 132s. 6d. They are now quoted around 95s., at which they offer the useful yield, on the present dividend rate, of more than 61 per cent. In my view they are well worth putting away for increased income and capital appreciation.

Jute Trade Activity

Jute Industries' experience in the year to September 30th, 1952, was most uneven. For the first five months the results were good ; for the next five months conditions were very difficult, with sharp falls in prices and reduced hours of work ; while the last two months saw a rapid build-up in activity. Since then, says the Chairman, Mr. W. G. N. Walker, in his annual statement, business has come in freely, and production is now at its highest level since 1939. Profit margins are much lower than at the end of 1951, but the order books are well filled ; and barring unforeseen- circumstances, the results next year should again be satis- factory." This progpect is encouraging to holders of the 8 per cent. Non-Cumulative Participating Preference units of 10s. each, which rank for a non-cumulative dividend of 8 per cent. and then for four-fifths of the surplus distributable profit. For the past year the total distribution on this stock was 14 per cent., which was covered 21 times by earnings. On this basis the yield on the stock at the current price of 14s. 9d.. is the attractive one of almost 91 per cent. In a liquidation the Preference stock units are entitled to 20s.

Beaumont Property Yield While the Government's intention to remedy some of the hardships of rent control is mainly of interest to owners of rent- restricted properties, it will be welcomed by other property-owners as a step towards the solution of the remaining problems of the industry. In spite of the many diffi- culties, some property companies have made quite a good recovery since the war. Among these is the Beaumont Property Trust, which owns blocks of freehold and leasehold property containing flats and shops, with some offices and garage accommodation. Before the war dividends of 71 per cent, were paid on the Ordinary £1 shares, but the 041inaty shareholders went without divi- dend from 1940 to 1945. The shares returned to the dividend list with 6 per cent. in 1946, followed by 7 per cent. annually for three years and 71 per cent. for each of the past three years. Last year's payment came out of earnings of 13.7 per cent. In his last annual review the chairman said that the repair of war damage had been completed and extensive maintenance repairs had been carried out. He mentioned that new build- ing costs are so high that rents of newly- erected properties greatly exceed rents. charged by the company for similar prop- erties of pre-war construction. He inferred from this that the company's properties should continue to be well let. In the light of the company's good record and favourable prospects the Ordinary £1 shares seem to be somewhat undervalued around 19s. At this price the yield is only slightly below • 8 per cent., which is appreciably more than can be obtained on most of the leading property shares. The ascending post-war dividend scale, in conjunction with last year's earnings, is of good augury for future • dividends.

Inveresk Attractions

Judged on the basis of assets and earning . power the 2s. Ordinary units of the lnveresk Paper Company appear to me to be good value for money at the current level of just under 5s. This company has recently issued its accounts and balance-sheet for 1952; and although, like other paper manufac- turers, it experienced a sharp setback in profits—it wrote off some £1 million from stocks out of earnings without utilising stock reserves—it was still able to show earnings of over 44 per cent. tax free on the Ordinary• capital, out of which a 10 per cent, tax-free dividend has been paid. The gross yield at the present price is thus not far short of 8 per cent., while the gross earnings yield is over 30 per cent. Even more impressive is the assets position. The consolidated balance- sheet shows that, after allowing for the 6 per cent. First and Second Preference stocks, there is a net asset value for the 2s. Ordinaries of about 10s. Current assets are disclosed at £9,864,000, of which £5,567,000 is in cash. In arriving at the break-up value of 10s. fixed assets are taken at the written- down balance-sheet figures, which must be low in relation to present-day values. Con- ditions in the paper trade are still difficult, but there are signs of recovery as excess stocks are eliminated. 1nveresk is an efficient unit in the industry and should be able to maintain satisfactory earning power in any- thing like normal conditions.

Anglo-Scottish Tea Trust

Tea plantation shares have been firm lately in response to the remarkable recovery in tea prices in London and Eastern markets. They arc, however, a tricky market for the average investor. The crops are subject to the hazards of blight, flood, drought and even earthquakes; and it is not always possible for the investor to find out which estates are producing the particular teas that are currently in good demand. For the non-specialist investor probably the best course is to buy the shares of invest- ment trusts which specialise in tea shares and should thus be able to select the most attractive holdings. One of these trusts is the Edinburgh-domiciled Anglo-Scottish Tea Investment Trust, whose 10s. shares are standing around 7s. 3d. to yield 9.6 percent. on the 7 per cent. dividend for the year to September 30th, 1952. During the past six years the annual dividends of this trust have averaged just over 8 per cent. In view of the continuing strength of the tea market I feel that these shares offer scope for apprecia- tion as well as a generous yield at the current price.