FINANCE AND INVESTMENT
By CUSTOS Tim pre-Coronation atmosphere has had a mildly tonic effect on the stock markets. General Neguib, Senator McCarthy and the Communists may possibly have felt its mellowing influence—though they might, of course, be merely postponing any unfriendly actions or remarks until the festivities are over. The Coronation may even be playing an important economic role. It has certainly brought a vast number of visitors to Britain and enriched the nation's overseas currency reserves. It has also helped invisible exports —particularly shipping and airlines—while overseas receipts from the films of the Coronation should also be substantial. There is, moreover, a growing feeling that the stock markets may have fully discounted coming events, so far as they can be gauged at present. The • inability of President Eisenhower to provide any tax relief for some time to come has disturbed Wall Street, but it also implies a continuance of high Government spending in America. It is becoming clear too that the Communists, even if their peaceful protestations are genuine, will try to extract the maximum advantage from any negotiations which may take place with the Western Powers. It may be a long time, therefore, before any worthwhile agreement is reached; and in the meantime any significant curtailment of the American and British defence programmes is out of the question. Finally, although the markets are very "thin" at present, there is a notable paucity of sellers, and a little hopeful buying has helped the gilt-edged and industrial markets and brought a few gains in depressed commodity and base metal shares. It is too soon to hail the end of the long winter of discontent, but the signs of market recovery appear to be more promising than in recent weeks.
Burmah Oil Results Burmah Oil joins the growing band of companies which have earned less but distributed more than in the previous year. After providing £4,741,422 for tax, the net group profit for 1952 is £489,153 lower at £2,871,838. The total dividend for the year is brought up to 15 per cent. which equals 224 per cent, on the capital ranking before the distribution of a one-for-two share bonus last August, and compares with a total payment of 21 per cent for 1951 on the smaller capital. The dividend is covered 1.6 times by earnings, which is better than it looks, since the earnings appropriate to Burmah's large holdings in Anglo-Iranian and Shell are not included. Some recent buyers had hoped that the increase in the dividend would match those of Iranian and Shell, and the Ordinary £1 units eased to 45s. 74d. on the results. This price is equivalent to 44s. 3d. x.d., at which the yield is 64 per cent. In considering the results, it should be noted that the company formerly drew most of its petroleum supplies for the Indian market from Abadan, and the loss of this refinery has necessitated new supply arrangements and the building • of a refinery at Bombay, jointly with Shell. The higher Iranian and Shell dividends for 1952 will presumably be reflected in Burmah's 1953 accounts, and I estimate that they should bring in £247,000 net more than in 1952. At current prices for the Preference and Ordinary stocks the total market valuation of Burmah Oil is about £52,000,000, and on my reckoning the huge holdings in Anglo-Iranian and Shell alone are worth £40,000,000. If other net liquid assets are included at market values, each Burmah Oil £1 Ordinary has .a net liquid asset value of nearly 52s. This makes no allowance for the valuable fixed assets and trade investments which apparently earned well over £1,000,000 net last year. For these reasons Burmah Oil Ordinary seem good value for anybody's money at the present price.
Coats' Earnings and Dividend People who are unfamiliar with the Stock Exchange are often astonished when shares fall on good news and rise on unfavourable news. Recently, for example, J. & P. Coats reported a fall of £8,114,142 to £3,919,038 in group profits before tax, yet the £1 Ordinaries have since improved 2s. 6d. to 445. 9d. The explanation is that the reduction in earnings had been dis- counted, and the market was relieved at the maintenance of the dividend at 124 per pent. for 1952. The rally in the price was possibly due in part to covering by "bears" who sold in advance of the news. The profit of £3,919,038 is reached after writing £5,652,285 off stocks ; and if raw cotton and thread prices had been stable, profits would, it seems, have exceeded £9,000,000. In the circumstances the net group profit of £3,076,269, against £6,862,563, is better than might have been feared from the headlong fall in the price of Karnak cotton during the year. In spite of the severe drop in net earnings, the Ordinary dividend is covered fully twice by earnings; and, given reasonable stability of prices this year, the payment should be covered even more generously. This, no doubt, explains Why the Ordinary stock, at 44s. 9d., yields not more than £5 12s. Od. per cent. In present conditions I think this is about right.
Worsted Profits Doubled 'After the chairman's warning last June about the unpromising outlook, the closing of many overseas markets, consumer resis- tance, keen competition, reduced profit margins and difficult trading conditions, the shareholders of Hield Brothers, the Yorkshire worsted spinners and manu- facturers, must have been pleasantly shocked by the preliminary figures for the year to March 31st, 1953. Net profits are up from £61,901 to £126,242, after providing £218,376, or £101,000 more, for taxation. The dividend is maintained at 25 per cent., but since it is augmented by a 25 per cent. cash bonus (against nil a year ago), the total distribution is doubled. The 50 per cent. payment is covered almost twice by earnings. Now standing around4s. 3d., which includes the net distribution of just over 3d., the is. Ordinary shares yield nearly 12 per cent, on a 50 per cent, distribution basis, or 6 per .cent, on a 25 per cent. basis. The sharp increase in the payment certainly suggests confidence in the outlook; but since half the payment is in the form of a bonus, it might be unwise to assume the maintenance of the 50 per cent. rate. The results in my view fully justify retention of the stock, despite the rise of 6d. in the price since the figures were announced; but I should not advise a further purchase just yet. The may be better bargains in the shares of oth West Riding companies which have yet issue their results.
Court Line Surprise Court Line's interim dividend of 50 p cent, took the market by surprise this wee And no wonder, for it is equal to 200 p cent, on the capital ranking before t] distribution of a three-for-one share bon last October, and it exceeds the total payme of 150 per cent, for the year to June 30t 1952. For that year the shipping freig index averaged 150.5, compared with 93 for the ten months to April, 1953. The last October, the Chairman emphasised th the capitalisation of reserves and the issi of shares carried no implication as to ti rate of dividend beyond the fact that fi dividend rate would be one quarter of wh it would have been had the capitalisation reserves not been made. ' Against tl background of the severe drop in freig rates and the chairman's warning, no oi could have expected so large an interi payment. What the final dividend and tl total earnings will be is a matter of gues work. Even if the total payment is no mo than 75 per cent., the yield on the Is. share now around 6s. 9d., will exceed 11 per cat Motor . Spares' Equity A yield of over 12 per cent, can be obtain( on the 5s. Ordinary units of Kerry's (Gre Britain), who are manufacturers and whol sale distributors of motor and cycle spare garage equipment, machine tools, engineer small tools and radio and electric apparatus. Results for 1952, announc( recently, showed a considerable drop profits, due partly to higher overheg expenses and a decline in sales of new tyre but the 45 per cent. dividend was cover( almost twice by earnings. Although tl current year has opened "on a distinct quiet note," the chairman sees no reason fi pessimism, and in his view the organisatic has never been better prepared to me existing competitive conditions. I note th, surplus liquid assets at the end of 195 after deducting prior charges, worked out] 9s. 6d per 5s. Ordinary unit, compared wit the present price of 6s. 1fd. The liqui assets can thus be bought at a discoun with the fixed assets thrown in gratis. T1 capital, however, is being increased, and ti board expect to make an issue when cm ditions are favourable. Since new isstx often depress share values, there seems to 1 no urgency to buy, but the shares should worth picking up on any setback.
High Mail Order Yield High yields often indicate a high risl but the risks attached to the Is. Deferre shares of Oxendale & Co. (Proprietors) d not seem at all alarming on the company post-war record-. For each of the six yea, to February, 1952, a dividend of 164 IN cent. was paid on these Deferred share This rate is now surpassed by a payment 25 per gent. for the year to February 28t1 1953. Group profits before tax are £35,0C higher at £183,409, and the earnings aft( tax come out at £65,408. After provisio for Preference dividends, the Deferre dividend is covered more than six times t earnings. The Is. Deferred can be bougl at about 2.s, to yield 124 per cent., and moderate purchase seems warranted 11 income-raising purposes.
Previous page
