FINANCE AND INVESTMENT
By CUSTOS
NEVER having suspected Mr. Dalton of being a courageous Chancellor of the Exchequer, I cannot pretend to be surprised at the contents of his eagerly-awaited Supplementary Budget. Nobody could argue that the raising of L208,000,000 in new taxation, supplemented by some modest cuts in subsidies and other Government expenditure, constitute really effective measures to close the inflation gap. Mr. Dalton has shrunk from attacking the food subsidies which were, in fact, the only field in which an effective counter-attack could be launched. So far as investors are concerned, the Budget may be described as good for gilt-edged, though perhaps not quite so good as had been widely expected, and on a short view by no means penal for the holders of Ordinary shares. The doubling of the profits tax from I21 per cent. to 25 per cent, is no more severe than had been feared, and except in the case of companies whose capital is highly geared, it should not involve any drastic dividend cuts. What I said here last week about the longer view is relevant today. Since the inflation gap has not been effectively closed, the distortion in Britain's internal economy and the consequent threat to stability will remain. For the present the short view will probably prevail in Throgmorton Street, with a broad improvement in prices.
COMING " SHELL " ISSUE Many investors must have been puzzled by the disappointing market performance in recent weeks of " Shell " Transport Ordinary shares which have lagged well behind in the upward movement of the oil share market. There need be no fear that the Shell group is losing ground to any of its competitors in this dynamic industry, the main reason for the lack of response in the shares being the well-grounded expectation that in the near future the company will make a substantial issue of new capital. According to City reports, the amount involved is likely to be at least £30,000,000 and it will not be surprising if the figure proves a good deal higher than that. At the same time the Royal Dutch end of the business will also come to market for a large sum. The capital expenditure programme com- prises the construction of new refineries in Europe, two at least of which will be in this country, while there are also important developments in hand in the rapidly expanding petro-chemical field.
Unless there is some last-minute hitch, the Royal Dutch Shell operation will be the largest undertaken in the capital market for many years past and will be sponsored by several leading London issuing houses. At the moment the favourite guess is that " Shell " Transport will rely mainly on an issue of new Li Ordinary shares on bonus terms, the suggestion being that about to,000,000 shares will be issued to shareholders at a price around £3 in the proportion of one new share for every three at present held. If this forecast is correct it is not difficult to understand why the existing shares should be a dull market, and the best buying opportunity may well arise when the rights are dealt in on the Stock Exchange in a few weeks' time. As a long-term investment " Shell " Transport must be given high rating. The world oil outlook is good, the group's finances are strong, its competitive position is well assured, and there is efficient and progressive management.
PROMISING PROPERTY SHARES Shareholders in United City Property Trust, whose prospects I analysed a few weeks ago, have good reason for satisfaction at the position disclosed in the full report. From the chairman's statement it is clear that the sale of Plantation House has considerably strengthened the company's finances, no less than Ltoo,000 now being on deposit at the bank, along with a substantial sum on current account. All mortgages, which in the last balance-sheet appeared at £1,356,683, have been repaid, and the company is left with pro- perties free from any encumbrances and having a book value of £934,035. The improvement in the liquid position has enabled the board to clear off Preference dividend arrears and the chairman holds out the hope that in the near future Ordinary dividends will be resumed with a payment at first of modest dimensions, but rising as the company's revenue grows. The Li Ordinary shares, now quoted around 23s., should be held for a further improvement.
Nor should investors overlook the implications of this deal for the Regis Property Company, the Plantation House buyers. Regis has been able to employ surplus liquid resources in purchasing this up-to-date property and its revenue should benefit substantially in the next two or three years. The Li shares are yielding just under 4 per cent. That may not seem a high dividend 'yield, but it will be surprising if the rate is not stepped up fairly quickly.
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