FINANCE AND INVESTMENT
By CUSTOS
Ir is a commentary on the newly-found caution of the average investor that this week's developments in the international political field have not led to any wild outburst of enthusiasm in Throgmorton. Street. Some slight improvement in what is usually called " market sentiment " there has been, but it has failed to ,find expression in any increase in business. This, I think, is a logical reaction to what, after all, is no more than a vague hope of better things to come. Divi- dend limitation, the export struggle and other problems have still to be reckoned with and must continue to dictate caution. Perhaps the most encouraging feature of markets just now is the firmness of gilt-edged, which has enabled this key section to take the announce- ment of another large-scale cash and conversion operation for Australia in its stride. If gilt-edged prices settle down, other markets will have a better chance of some mild improvement.
BID FOR PROPERTY CONTROL
It is one of the attractions in these days, from the speculative point of view, of the shares of property and investment trust companies that buying for the purpose of acquiring control is liable to force prices to unexpectedly high levels. The latest case in point is the Li Ordinary shares of United City Properties, which have steadily advanced during recent months from 24s. to 37s. against the trend of property share values in general. As I recommended these shares at 243. in July of last year, I feel compelled to give advice to holders who are now faced with the problem of whether to take the hand- some profit or to hold on in the hope of a further rise. The buying, - it appears, has been on behalf of the Land Securities Investment Can- pany, a go-ahead property undertaking which has recently been extending its interests and which has now acquired a substantial interest in the Ordinary capital of United City Properties. What the average price paid has been can only be guessed, but it is probably over 3os., and it is a reasonable inference that the shares have been taken up as a long-term investment.
In relation to the immediate dividend prospects the present quota- tion of 375. must seem high, but on a longer view it may well prove fully justified. United City Properties owns three large buildings in the City, all of which are fully let. Earning capacity is restricted to some extent at present by the fact that a number of the existing leases are at rents fixed before the war and there is still a considerable amount of space under requisition. As pre-war leases fall in and are replaced and de-requisitioning takes place, revenue should increase. That, over a period, must raise the earnings on the highly-geared equity capital quite substantially, and it is doubtless this prospect which has led Land Securities Investment to acquire such a large holding of the Ordinary shares through the market. Even allowing for these longer-term possibilities, however, I feel that the share rise has been rapid and that some reaction will probably take place. My advice to holders is, therefore, io take advantage of the present situation and cash in the profit.
A 9 p.c. YIELD
Among the second-line industrial Ordinary shares offering what appear to me to be unduly high yields I would include the Is. Ordi- naries of Lehmann, Archer and Lane, now quoted around its. 6d. These shares were the subject of an offer for sale in July, 1947, at 13s. 6d., but have since been a somewhat difficult market, because the offer was made in adverse market conditions. The profit records showed that this old-established firm of precision engineers had earned nearly ix per cent, on the offer price over the preceding ten years. Profits for the year to November 3oth, 1946, were equivalent to over 15 per cent, on the offer price of 13s. 6d., and for the year to Novem- ber 30th, 1947, there was a further improvement, earnings, after taxation, having risen from £34,103 to £48,715. A dividend of roo per cent. was paid, after which the directors were able to raise the carry-forward from £51,729 to £71,091. In his statement at the annual meeting on March 24th, 1948, the chairman emphasised the importance of the company's activities in providing home manufac- turers with essential tools for raising their export shipments of loco- motives, agricultural and textile machinery and electrical engineering equipment. He also pointed out that althotigh the issued capital was only L5e,000, the actual capital as computed for tax purposes was over £25o,00o. At the present price the shares offer the high yield of 9 per cent. and may be regarded as an attractive speculative investment.
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