FINANCE AND INVESTMENT
By CUSTOS
DEVALUATION has come and only its timing and its scale have caused surprise. Logically, this gamble with the currency should have followed, not preceded, the measures of retrenchment so urgently needed to strengthen Britain's competitive position in the inter- national field. It is now clear that Sir Stafford Cripps has had to yield to the inexorable pressure of events. I do not think he is really happy about devaluation and I am not convinced, either, that he will be able to follow up this move with the appropriate internal measures to keep down costs. For this reason I would not like to underwrite the rather surprising recovery in gilt-edged stocks. Time will show whether balance has really been restored.
What of other investment markets? Well, I have recently been advocating gold and rubber shares and some sharp rises have taken place. Once the dust has settled, I should expect gold shares to move, on selective lines, to higher levels, especially some of the marginal producers, Nat as Randfontein, Springs and Robinson Deep. The case for rubber and other commodity shares also looks unchallengeable in the new conditions, though care is needed now that the first rise has taken place. Home industrials ? Again, the prospects for a wide range of companies with dollar export poten- tialities must be greatly improved. I should expect to see a larg:r turnover in markets over the coming months.
OPPOSING STATE SUGAR PLAN It is good to see stockholders of Tate and Lyle standing solidly behind their board in an all-out-fight against threatened national- isation. Here is a case strongly reminiscent of that of the cement industry, where all the facts are on the side of private enterprise. Tate arid Lyle is a well-conducted company, which has done good service to its customers, employees and shareholders. Lord Lyle, who does not pull his punches, gave stockholders these facts at the recent meeting: sugar refiners need no subsidy ; against every Ltoo distributed as dividends last year Lite company retained nearly £200 in the business ; last year net dividends were only 0.7 per cent. on turnover, or 1/28th of a penny a pound of sugar sold. This company has done well to segregate its non-refining interests as a pre- cautionary measure. Stockholders should not be panicked into selling around the present price of 70s. Despite the low dividend yield, Tate and Lyle Ordinary shares should prove to be good value on the strength of the assets position.
• A CHEAP RUBBER SHARE
The response made in the rubber share market to the devaluation of the pound and to the recent substantial improvement in the price of rubber has so far been disappointing. There has been some profit- taking, as in gold shares, by speculative buyers who took a view on rubber shares before devaluation was announced, but once this selling has been absorbed I should expect the advance to be resumed. Among the cheap shares, whose merits I outlined a .week ago at 9s. 3d., are the Li Ordinaries of F.M.S. Rubber Planters Estates, which can still be bought around cos. 9d. For 1948 the company harvested a crop of 3,378,662 pounds of rubber, which was realised at an average gross price of just under told. A little simple arithmetic will show that with rubber now fetching 2d. a pound more, earnings on the capital of £245,000 will be increased by about II per cent. Even in 1948 earnings were just over it pet cent. before charging rehabilitation costs, so that prospective earnings seem to be in the neighbourhood of 20 per cent. The company has a sound balance-sheet and alert management. Last year thl shares touched ifts. and in 1947 were over par. In view of the improved outlook for rubber the shares should have considerabl' scope for capital appreciation.
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