Investment Notes
By CUSTOS Q TORE shares look and behave very
much like a stale bull market. The HARRODS bid drags on—dragging down the shares of the bidders—and the popular press is suggesting that whoever buys Harrods will pay too much. This is scarcely a bull point for the market. The excellent report of GUS for the year to March 31 has been fully dis- counted. The moderate increase in trad- ing profits was after providing £3.3 million for unearned profits and collection of charges on the larger hire-purchase busi- ness transacted. If this provision were added back, the increase in profits would have been over 20 per cent. Another encouraging feature was that the rise in profits in the first six months was only 1 per cent whereas in the last six months it was 10 per cent. It is obvious that the current year will be an extremely prosperous one for GUS. Not only should the increased dividend of 35 per cent (which was covered 2.2 times) be maintained on the capital increased by the proposed 1-for-10 scrip issue, but a still higher dividend is not impossible. The 'A' shares have come back slightly to 42s. 9d. and if the next dividend is merely maintained at 35 per cent the yield would be around 4+ per cent, but if the dividend were increased to 40 per
cent, which I think probable, the yield would be nearly 5 per cent. The shares are therefore worth buying on any reaction in the market. And if Mr. Wolfson would only enfranchise these voteless 'A' shares, they would be soaring. I would
also recommend UNITED DRAPERY now that it is no longer trying to buy HARRODS —for its 5s. shares at 37s. 9d. ex rights to yield 4.6 per cent on last year's dividend are surely a reasonable purchase in this boom year for the stores.
Property Shares
The spate of new property issues- - sixteen so far in the last two months— is not doing that market any good. It will be years before development of as- sets justifies the issue prices of some of the recent flotations and was not sur- prised to see some of them selling at a discount. However, this should not deter the investor from takitig an interest in the more solid companies which are de- veloping office and shop property in the City, Knightsbridge and Piccadilly Cir- cus. An old recommendation of these notes is CITY OF LONDON REAL PROPERTY whose shares have risen by over 50 per cent this year and at 62s. 6d. now return a yield of 41 per cent. This company is now developing the Stag Lane brewery site. I would draw fur- ther attention to CENTRAL AND DISTRICT PROPERTIES Which has just declared a final dividend of 15 per cent, making 221 per cent as forecast at the time of its merger with Unicos Property.
(This is against 15 per cent previously paid on a smaller capital.) Net profits, after tax of £169,751, amounted to £151,933 for the year to March, 1959, and for the next few years a progressive increase in profits amounting to over 60 per cent is anticipated because of the release of Berkeley Square House now occupied by the Ministry of Works for a total of 340,000 sq. feet at a rental of only 5s. 9d. per sq. ft. The Ministry lease expires in September and they have been granted an extension until March, 1961, at a greatly increased rent which is still below the current market. The balance of 90,000 sq. ft. is occupied by banks and other commercial firms. The company is also building on land in Mar- ket Street, Manchester, and will have 50,000 sq. ft. of office space to let there in due course. The net assets of the company after the Unicos merger were valued at £7 million which would give the equity shares a net asset value of almost 20s. before recent acquisitions have been completed. The directors now forecast a dividend of not less than 30 per cent for the current year which puts the 4s. shares at 23s. on a yield basis of 5.2 per cent. They also propose writing up the shares from 4s. to 10s. shares which would put the new shares on a 12 per cent dividend basis after capitalisa- tion. There are few property shares which - seem to be so fairly valued.
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