Venturers' Corner
It is good to see Old King Coal climbing back on to his throne after the buffetings of the slump years. Home con- sumption of coal has established a new record this year and total production, estimated at 240,000,000 tons, is the highest since 193o. So long as internal industrial activity is held at a high level, as I anticipate it will be for some years, the demand for coal should be well maintained, and there is at least an even chance that we shall be able to hold our own in the export markets. Here is the basis for a speculative purchase of Old Silkstone Collieries LI preferences at today's price of 15s. 9d. Trading conditions have already improved sufficiently to allow this company to bring forward a capital reconstruction scheme, and it seems surprising, in the light of the terms suggested, that the preference shares are not standing around par in the market.
Under the proposed scheme, preference holders will receive one new los. 6 per cent. cumulative preference, one new los. 5 per cent. second participating preference and two new ordinary is. shares for every LI preference held. Now the board estimate that, given a continuance of present trading conditions, the company should be able to make a net profit of roughly £40,000. On this basis the 6 per cent. dividend on the new first preferences would be covered roughly 3 times over, the second participating preferences would receive their basic 5 per cent. plus an extra 5 per cent., making zo per cent. and it would be possible to pay a 5 per cent. dividend on the new ordinary shares. What are the three classes of shares worth in relation to this estimate of earnings ? Conservatively, I should value the first prefer- ences at 9s. to yield 6 per cent., the second preferences at Its. to yield just over 9 per cent., and the is. ordinaries at 6d. to yield to per cent. If you add together the bits and pieces which existing preference holders are offered, there is a total value of 2IS., against today's quotation of 15s. 6d. The shares should prove a good speculation. Cusros.
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