FINANCE /OM INVESTMENT
By CUSTOS WITH holiday influences in full swing markets are now dominated by " professional" activities. That even the hardened operators are finding it hard to see their way is clear enough from the small volume of dealings and the absence of any real trend of prices. Until the Berlin situation is resolved there cannot be a basis for anything resembling investment confidence and, if and when it is, the other problems confronting would-be buyers of industrial Ordinary shares will still remain. In present circumstances I cannot advise any departure from the policy I have advocated in recent weeks of avoiding the speculative groups (I except "liquidation shares ") and concentrating on safety-first securities. Nor would I dissuade any- body from adopting the policy of partial liquidity.
DISAPPOINTMENT FOR KAFFIRS
Satisfactory from most points of view—there are no penal taxes on South African industry or prohibitions on the inflow of genuine investment capital front' abroad—Mr. Havenga's Budget in South Africa has come as a disappointnient to Kaffir shareholders. It is not that the Finance Minister of the Malan Government has shown - any unfriendliness for the gold-mining industry, but there is nothing in his proposals which will make any real contribution to the problem now confronting the majority of the mines. That problem is one of greatly increased costs, flanked by a fixed selling price for their product. In the case of a great number of mines this means that profits have been whittled down to such small proportions as will permit of only trifling returns on the capital invested. The small relief which the Budget promises, amounting in the aggregate to only £900,000, does not bring any benefits to the low-grade or marginal mines, but helps, and then only to a limited extent, some of the high-grade undertakings and the mines in the develcprnent stage. It seems to follow that unless devaluation comes, bringing a higher selling price for gold in its train, Kaffir shareholders will have to look to a fall in world commodity prices as the means of easing their plight.
A PREFERENCE SPECULATION There have been several interesting developments in the past few weeks in the affairs of Phoenix Oil Products. Not only has the control and management of the company changed hands, but some real progress has been achieved in getting the finances on to a better footing. The stage has, in fact, been reached at which the LI Preference shares, now quoted on the Stock Exchange around 7s. 3d., can be regarded as a distinctly promising speculation. Last week the new board announced that it had succeeded in concluding a contract with one of the largest groups of oil producers for the sale of the German and Austrian distributing organisations. The pur- chase price is stated to be not less than £1.8o,000 and may be as much as £190,000. ,Shareholders have also been informed that negotiations are proceeding for the sale of the Belgian subsidiary, which has a balance-sheet value of about £8o,o9o. If one takes the lower figure of £18o,000 as the sale price of the German and Austrian assets, that is the equivalent of 6s. a share on the £600,000 of Preference capital, leaving the extra Is. 3d. a share, equivalent to £37,500, as the price a buyer of the Preference shares is now paying for the whole of the rest of the assets.
This seems to me to be an unduly cautious estimate of the possi- bilities. It should not be.over-optimistic to assume that, say, £40,000 is forthcoming for the Belgian organisation, apart from which the company has war damage claims in respect of its subsidiary under- taking in Yugoslavia and its substantial interest in Alpha Petrol, a South African undertaking. Altogether, it is by no means unreason- able to expect that, given time, the directors should be able to produce something well over los. a share for the Preference share- holders. The attraction is that the proceeds of the sale of the German and Austrian subsidiaries, equivalent to 6s. a share, together with the sale price expected in the near future for the Belgian busi- ness, should be available for distribution by way of repayment of capital to the Preference shareholders within the next month or two.
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