6 FEBRUARY 1959, Page 31

INVESTMENT NOTES

By CUSTOS

THE steam has gone out of the equity share market and not unnaturally gold shares and gilt-edged stocks are moving up. The new Barbados loan established one premium and the new ESSO 51 per cent. debenture 1978-83 at 98 will certainly go to one premium also. industrial shares have not been without some special interest. R:membering the BRITISH ALUMINIUM affair Lord Chandos. chairman of ASSOCIATED ELECTRICAL INDUSTRIES, has assured shareholders that they

would be consulted on every occasion when an issue of a block of shares was to be made to a single company or where an exchange of shares with another body of shareholders was proposed. unless the amount involved was only a very small percentage of the ordinary share capital. On being questioned as to future dividend prospects on the capital increased by the issue of shares in acquir- ing London Electric Wire and Smith's, he gave shareholders to believe that the same rate as before, namely 15 per cent., would be forth- coming, in which case the I:1 ordinary shares, which have recently slipped back to 54s. 6d., must be an attractive long-term investment to yield 5.45 per cent. Wise investors are looking round for the leaders of the next 'bull' market. Consumer goods shares which hold the lead in the present phase will probably give way to select capital goods shares in the next. • Gold Shares In theory it is wise for every portfolio to have a gold share holding as a hedge against the industrial risk of the equity shares. The enor- mously rich strike of FREE STATE GEDULD last week—which 'leaked' in Johannesburg a week before the news broke in London—proves that a well-chosen gold share can he very profitable as well as prudent. My previous recommendations of 'OFSITS' and WESTERN HOLDINGS Should benefit greatly from the FSG development. `Ofsits' holds about 2 million FSG shares, which are now valued at about I:15 million. Seeing that the last balance sheet valued all its gold holdings—FSG, Western Holdings. President Brand, President Steyn, etc.—at only £17.3 million 1 would esti- mate the present market value of the shares of 90s. to be about 10 per cent, under the break-up value. The last distribution was 4s. per share, but

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this year 5s. or 5s. 6d. per share can be expected to give a potential yield of around 6 per cent. at the present price. The attraction of Western Holdings is that its property lies to the south of FSG, the boundary being only three- quarters, of a mile from the new strike. Accqrding to the mining experts there is no doubt that the north of the Western Holdings mine comes within the very rich zone of the FSG and that other areas Flay prove to be almost as rich. At 130s. the Western Holdings property is valued at only £48f million against £74 million for the FSG property. The last distribution was 7s. a share, but 9s. for the current year ending September can be anticipated, which would give a potential yield of 6} per cent. The shares look rela- tively cheap. GENERAL MINING can also be recommended. This gold finance house has about 67 per cent. of its funds in new gold mines, 20 per cent. in other gold mines and about 8 per cent. in base metals. Its main gold investments are Free State Geduld, Buffelsfontein, Stilfontein, Har- mony, St. Helena and Free State Saaiplaas. Its market capitalisation is only about 70 per cent. of its net assets. The last dividend was 25 per cent., and for the year ending December, 1958, 35 per cent. can reasonably be expected. This would give a potential yield of 5.45 per cent. at the present price of 128s. 6d.

Television Shares

Shareholders of GRANADA were pleased to note that the Bernstein brothers were handing over the deferred shares in their television subsidiary to the parent company, but have had to stomach a block of 'A' ordinary shares going to executives and executive directors. They have also to be con- tent with the fact that the company's profits com- pare unfavourably with those of ATV and ASSOCIATED BRITISH PICTURE because of the split- ting of profits with another programme contractor under an agreement made in 1956 which does not expire until 1960. Shareholders of Associated British Picture are in a more fortunate position. They have been told of the 66 per cent. increase in profits for the year to March, 1959. The interim dividend has been increased from 74 per cent. to 20 per cent. and a total of 510 per cent. for the year does not seem impossible. This would allow a potential yield of 5.55 per cent. on the Ss. shares currently valued at 45s. The interim dividend of ATV has been increased from 10 per cent. to 40 per cent. and it appears that 100 per cent, for the year is coming. With the shares at 70s. 9d. to give a potential yield of 7.05 there seems room for further appreciation when the shares are officially quoted. But I have the feeling that television shares, after their phenomenal rise, will, before long, run into a 'political' phase which will deter potential buyers.