21 SEPTEMBER 1956, Page 29

COMPANY NOTES

BY CUSTOS As the Suez crisis gets more entangled there is no inclination on the real investor's part to add to his commitments on the Stock Exchange. Speculation seems to have been transferred to the commodity markets and notable rises have been seen in the prices of rubber, tea and the base metals, particularly tin, which has now a stabilisa- tion scheme. To rush into the commodity producers' shares would be a risky pro- ceeding, for no one can tell whether the rise in commodity prices will be lasting or whether the benefit of any rise will reach the producers' equity. As far as tea and rubber are concerned, serious political risks remain and the investor would be well advised to keep to the managing agents, HARRISONS AND CROSFIELD, which I recom- mended three weeks ago on account of their prosperous subsidiaries in the United States and Canada and 'the chance of a higher dividend in November. The shares have since risen slightly but at 55s. are still worth attention. HECHT, LEVIS & KAHN, perhaps the largest rubber dealers in this country, are more speculative, but their results to March last, due in November, are expected to show great improvement. The 5s. shares stand at 8s. 9d. to yield nearly 9 per cent. The most remarkable rise of the commodity producers' shares has been CONSOLIDATED ZINC—up from 62s. to 70s. on the talk of bauxite developments. The sudden demand caught the market short of shares and I advise waiting until this demand has been satisfied. The shares used to sell on a 7 per cent. to 7+ per cent. yield basis and at 70s. the yield is 6+ per cent. on the dividend of 22f per cent. covered nearly twice by earn- ings. The strength of the company probably justifies a lower dividend yield. Outside these commodity shares speculative interest has revived in shipping shares and western oils including, very properly, CANADIAN EAGLE, which owns an expanding tanker fleet operating between the Gulf of Mexico and the UK.

- Paper shares have fallen out of invest- ment favour, which is not unexpected see- ing that the industry is facing more difficult trading conditions than it has seen for the past three years. A temporary over-produc- tion is threatened next year and in the meantime profit margins are narrowing. The strong companies will survive these difficulties, as they have in the past, and as the long-term outlook is promising this may be a good opportunity to pick up the 'A' shares of A. E. REED. The market has been particularly depressed in this case by the issue of new shares to acquire Colthrop Board and Paper and Cropper. It was only in May that the company issued one new share for two at par to finance the extensive capital programme. The shares have come back to 51s. 6d. against a high of 61s. 3d. this year and on the anticipated dividend of 16 per cent. yield 6.2 per cent. As the last earnings covered the dividend five times, the shares are worthy of a lower yield basis than 6 per cent. It is not often that A. E. Reed 'A' are quoted below WIGGINS TEAPE Which at 52s. 6d. return a yield of 6.65 per cent. on dividends of 17+ per cent. covered 2.8 times. These shares would be my choice after A. E. Reed 'A.'

It is not my practice to recommend min- ing speculations, but the shares of MOUNT ISA, which has been mining silver-lead-zinc ore in Australia since the 1930s, enjoy the status of a sound speculative investment. What makes them interesting today is that the company started mining copper in 1953 and two years ago discovered a very large copper deposit. The doubtful question is the cost of extraction—coal for the power plant has to be hauled 760 miles—and it is therefore interesting to hear that the com- pany is investigating the possibility of con- structing a nuclear power plant. The Gov- ernment has promised to give technical, but not financial, aid. Mount Isa Ss. shares (Australian currency) yield 3+ per cent. at 26s. on the 25 per cent. dividend (covered 2.3 times) and as this is the highest price for the year I would advise caution. A com- bined purchase of Mount Isa and CONSOLI- DATED ZINC might be advisable on any size- able market fall.