COMPANY 'NOTES
By CUSTOS
THE gilt-edged market opened the week with a fit of the Cohen Com- mittee blues, which is not surprising. Some recovery followed on further reflection that money rates were, after all, getting cheaper—witness the fall in bill rate and the lower rates charged to local authorities out of the Local Loans Fund this week. But the rest of the markets, apart from gold shares, remain weak and despon- dent. The oil share debacle goes on as the calls on the new SHELL and BRITISH PETROLEUM shares come near. No less than £40 million will be taken from shareholders by these two companies in a few days' time. Shell new shares, nil paid, fell at one time to 10s. premium—now 14s. As most people have allotments of fives, tens and twenties there is a continual stream of small selling orders. At what price the bottom will be reached I would not like to guess, but at the issue price of 110s. the shares would yield £5 18s. gross.
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There was disappointment in the market over the dividend of BRITISH AMERICAN TOBACCO, but some investors are never satisfied. Profits for the Year to September last were about 101 per cent. higher and equity earnings rose from 441 per cent. to 541 per cent., which was very satisfactory. The dividend was slightly increased from Is. 6d. to Is. 71d. tax free, but the market was going for Is. 9d. What should reassure shareholders is that the interim dividend has been increased from an effective 5fd. to 6d. tax free, and it may be that 2s. 3d. tax free will be paid for the year. At 38s. 9d. the gross yield on the basis of the present 16 per cent. tax-free dividend is about 7 per cent., which is very attractive. IMPERIAL TOBACCO, which has a large holding in BAT, thought it prudent to make a modest cut-from 21 per cent. to 20 Per cent.-in its dividend for the year to October last because of slightly lower profits-due to higher manufacturing and selling costs-but equity earnings came to 331 per cent., which makes the reduced dividend look safe enough. At the present price of 37s. 3d. the shares return nearly 101 per cent.
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It is strange that some investors feel happier about holding gold shares when they know that Russia is an interested party, producing as much gold as South Africa (17 million ozs.). Of course, Russia sells gold like a commodity when she Wants foreign currencies to pay for imports and last Year she sold as much as 71 million ozs. It should be more comforting to investors to know that there is still a steady hoarding demand for gold, which Samuel Montagu, in their annual bullion report, estimate for last year at 21 million ozs. for Europe (half of that smuggled illegally into France), 21 million ozs. for the Middle East, and about as much for India and the Far East. At $35 an ounce, excluding hoarders' premium, this can run into nearly £100 million a year. The renewed specula- tive interest in gold shares-French and American buying has been reported-is not due, however, to these considerations but to the prevalent idea that if the American recession becomes really serious, as so many experts expect, the American Treasury will at last consent to write up the price of gold. I have previously recommended PRESIDENT BRAND and PRESIDENT STEYN as two developing mines in the OFS which offer the investor high returns on current dividends. At 48s. 9d. and 28s. 9d. the shares return 'yields of nearly 10f per cent, and 9.6 per cent. respectively. The current dividends of 5s. and 2s. 9d. should be again increased slightly in the current year. For a' less speculative OFS mine I recommend WESTERN HOLDINGS at 91s. 9d. to yield nearly 51 per cent. on the current 5s. dividend which also should be increased. Good news about the rich- ness of this mine will probably be heard before long. Outside the OFS I like VAAL REEF in the Far West Rand, whose dividends should be increased again this year. At the current price of 37s. 6d. the yield on the present 3s. 6d. dividend is about 9.3 per cent. Of the holding finance companies GENERAL MINING has relatively less metal interests than the others and at 77s. 6d. returns a yield of 5.2 per cent. UNION CORPORATION offers the highest yield of the finance companies, namely 7.9 per cent. at 37s. 9d.
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