FINANCE AND INVESTMENT
By CUSTOS
WHEN buyers out-number sellers on the Stock Exchange jobbers raise prices. Sometimes the more thoughtful and cautious market dealers are also inclined to raise their eyebrows, and there is no denying that the sudden revival of support for leading industrial ordinary shares in the past week has caused considerable surprise. In a market with only very limited supplies of shares at its disposal this buying move- ment has inevitably provoked a disproportionate rise in quotations. The question is naturally being asked : Has the recent down-trend been definitely arrested, or is the rally only a technical affair which will fail to carry into higher ground?
I would not like to commit myself to any definite view on this matter at this stage. So much hinges on the degree of success achieved by British exporters in the coming months, to say nothing of developments in other countries. .By the same token I must repeat the advice, to investors given here in recent months to adopt a policy of partial liquidity and await special buying opportunities. I see no reason, on the other hand, why anybody should remain less than, say, 75 per cent. invested or why sound shares should be sold. Technical influences springing from the re-investment of railway money are playing a large part in the present recovery in markets. They will wane after the turn of the year, but may well be reinforced later by the long-delayed pay-out to Argentine railway investors and the vest- ing of electricity supply shares.
MR. RANK'S STATEMENT
.Mr. J. Arthur Rank and his colleagues on the Odeon Theatres board have acted wisely in responding to City criticism of their pro- jected deal by issuing a full and frank statement. The facts now disclosed about the assets and earning power of the General Cinema Finance Corporation ram home the point I made a fortnight ago that when a large-scale deal of this kind is contemplated the proper course is to put all cards on the table. Shareholders in Odeon Theatres will scarcely be favourably impressed by the earnings record of the company which they are now invited to acquire. Reports in the City that General Cinema Finance had incurred heavy losses in the making of certain prestige films are fully confirmed. For the past three years losses on film production, as distinct Tram film dis- tribution, have amounted, in the aggregate, to over £2,000,000.
As the balance-sheet shows indebtedness at over L8,000,00o, and it is frankly stated that another £2,000,00o is required to finance an expansion of the film production programme, it is hard to see why the share capital Of General Cinema Finance has been valued at par for the purposes of the projected deal. If the balance-sheet position and earnings record were taken as the sole criterion of valuation, the right price would seem to be somewhere nearer los. a share than LI. The explanation afforded by Mr. Rank is that the acquisition of General Cinema Finance is of key importance to Odeon Theatres in that it safeguards the supply of films for the Odeon Theatres circuit. One can readily appreciate this aspect of the strategy of the film industry at a time when the exhibiting side may run into an acute shortage of films ; but it is difficult, all the same, to see why the relations between Odeon Theatres and the Gaumont-British interests should be rationalised by means of this particular deal on the proposed terms.
A GOOD RUBBER SHARE
In the rubber share market the recent improvement in the price of the commodity is finding reflection in renewed investment support which, in turn, is finding justification in the better results of the producing companies. In my view there is still plenty of scope for a further recovery in this section, the dividend prospects ,being by no means fully discounted. A good illustration is afforded by the £r shares of Mount- Austin Rubber Estates, now quoted around 13s. 6d. This Malayan producer has just resumed dividends with a payment for the year to March 3rst of 4 per cent. "Profit on rubber account " of £33,193 was made on an output of 1,326,300 lbs. Of the total planted area of 11,339 acres, 5,494 acres were in, tapping at March 3ist, and rehabilitation work is progressing steadily. A feature of the company's output is that 91 per cent. of it was sold
as liquid latex, for which there is a large demand, and which com- mands a good premium over ordinary smoked sheet rubber. The
balance-sheet position is strong, net liquid assets representing 54.3 share. Offering a current yield of 6 per-cent., the shares look an attractive purchase in the light of the promising prospects.
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