Market Notes
By CUSTOS
rROFIT-TAKING fell upon the gilt-edged market after its recent boom but the longer-dated issues were firm at their lower prices. The new 'tap' stock—EXCHEQUER 61 per cent 1972 at 98-s and FUNDING 6} per cent 1985/87 at 9816— opened quietly at -Fig above their issue prices. The flatness of the yield chart from 'shorts' to 'longs' is quite unclassical. The 'shorts' are either too cheap or the 'longs' too dear but as everyone believes that the long-term rate of interest is bound to fall further the 'longs' are still popular. There has been a lot of switching out of EXCHEQUER 5 per cent 1967 into other 'short' bonds particularly CONVERSION 6 per cent 1972 which becomes a 'short' on February 15. At 981 this is an attractive stock being in a tax-free zone.
As regards equities there is still a lack of con- fidence and many brokers believe that the recent recovery was a false one. There is still interest, however, in takeover issues. The terms of the PHILIPS LAMPS offer for PYE are considered attrac- tive. For every 2 Pye Ordinary shares the holder will receive 24s. in cash and an option to buy back one 5s. Ordinary share during June of the four years 1970-73 at a price of 14s. This could be an attractive option if Philips succeeds in turning the fortunes of Pye. Some brokers believe that profits will get back to the £5 million level achieved in 1964/65 at some time during the next seven years. If so Pye would be selling on a price/earnings ratio of 11 at a price of 14s. or on a price/earnings ratio of 9 if profits reach £6 million. Incidentally Philips Lamps has made some recovery to 88s. to yield 4.1 per cent. This company is the leader in Europe in colour tele- vision which will give a big boost to profits when it comes. It is not forgotten that the shares reached a high point of 232s. in 1961.
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