COMPANY NOTES
By CUSTOS
THE long Easter account on the Stock Exchange ended on Tuesday with a firm undertone but no liveliness, except in oil shares. The favourable Budget out-turn- with a surplus of £397 million above-the- line and an over-all deficit of only £141 million against an estimated £515 million— helped the gilt-edged market, and War Loan recovered to over 74i. There was nothing, however, in the Economic Survey to help the market in industrial equity shares. That market has done well to recover 10 points or 6 per cent. from its low level on March 3, and I can only see it marking time until the Budget.
Among the more active oil shares, SHELL have been prominent with a rise of 10s. over the past fourteen days. This has been due to strong American buying prompted, I understand, by an English broker who took with him on a visit to New York a favourable analysis of Shell in relation to its senior partner. ROYAL DUTCH. Since Royal Dutch was listed on the New York Stock Exchange the price has gone ahead faster than that of Shell. On the basis of existing dividends of 16 per cent. for Royal Dutch and 15 per cent. tax free for Shell (the Americans can recover the Shell tax) the gross yield is 3.6 per cent. for Shell and only 2.1 per cent, for Royal Dutch. If Shell is ever to be listed on the New York Stock Exchange the dividends would no doubt be paid gross. On earnings the posi- tion also favours Shell, for it has a substan- tial 'other income' which results in its dividend cover being 5.4 times against 4.8 times for Royal Dutch. Will the limit dividends, due in three weeks' time, be increased? This is the question intriguing the market in London.
*
This American buying of Shell has put the oil share market rather out of balance. Shell topped its 1956 high while Mins!' PETROLEUM were still 5 per cent. below and HURMAH OIL per cent. below their highs. The result was a sharp rise in both shares on Tuesday of 6s. and 3s, respectively. Burmah Oil still seems particularly cheap. Its investment in British Petroleum and Shell at present prices is worth over 75s. 3d. a share. Add trade investments of 3s. 3d. per share, net current assets of 5s. and fixed assets of at least 7s. 6d. per share, making 91s., Burmah Oil at 70s. 9d. are selling at only 77 per cent, of their intrinsic asset value. The market is anticipating an in- crease in the Burmah dividend from 101 per cent. to 15 per cent. The interim dividend was raised from the equivalent of 31 per cent. to 5 per cent., and the final is due to be declared in May. On the basis of 15 per cent. the yield at 70s. 9d. would be 41 per cent.
Previous page
