Venturers' Corner
With Japan out of the buying side of the market it was perhaps too much to expect wool prices at the latest Sydney sales to hold all the extensive ground gained in the past three years, but the quotations look good enough to ensure very prosperous times for Australia. I see that D. and W. Murray preference shares, recommended in these notes at tos. a few months ago, are now worth over 13s. in their new sub-divided form following the capital reconstruction. Both the preferences, which offer a good yield, and the new 5s. ordinaries, at 3s., should still be held. Another company engaged in the same kind of merchant- ing business in Australia which should now be nearing the reorganisation stage is Paterson, Laing and Bruce. There is a small debit balance of £57,744 to wipe out and some writing down of assets will be required to adjust matters to the depre- dated rate of exchange, but there is £250,000 of ordinary capital available for this purpose.
The interesting securities from a speculative standpoint are the Lx First Preferences, at 15s., and the Li second preferences, at 9s. 6d., both in arrears for dividends since July, 1930. I do not suggest that it will be practicable to pay off these arrears in hard cash, but I shall be surprised if earnings have not already recovered to a level which justifies a higher price for both the preference issues. The next accounts, covering the year ended July 31st, 1937, are due in October. They should disclose a strong recovery in earnings sufficient to enable the board to bring forward a capital reorganisation scheme.
To cover the full dividends on the two classes of preference shares net earnings would have to reach some £35,Goo. In pre-slump days earnings ran at a much higher level than this but the company did not then suffer the handicap of the heavily-depreciated exchange rate. My own view is that first preference dividends should be covered in future, that some scaling down of the second preference may be necessary or desirable, and that arrears will be satisfied by a generous transfer from the ordinary shareholders. CUSTOS.
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