RAIL EARNINGS ESTIMATES
With characteristic enterprise the home railway market has lost no time in compiling a quick guide to earnings and yields on the more speculative stocks at various stages of net revenue under the war-time financial plan. Some of the results are really startling. At " Stage 2," for example, which implies a net revenue for the pool £3; millions above the guaranteed minimum, stocks such as L.N.E.R. second preference, L.M.S. ordinary and Southern deferred all show earnings yields of over 12 per cent. at current market prices. On Great Western ordinary, now quoted at 48, the corre- sponding yield would be just under ro per cent., and London Transport " C" would show 7 per cent. at 44.
These potential yields are high enough to justify the speculative support which many of these stocks are now attracting, although I feel that for the present it would be unwise to look beyond " Stage 2 " as the probable level of net revenue this year. Lists have clearly risen substantially and an adjustment of charges will obviously be required before long if the companies are to get the benefit of rising gross receipts. At the moment the railways are preparing their case for higher charges and it should be submitted early next month. As the chances seem to be very much in favour of the railways succeeding, the market should move gradually towards better levels. My choice, from the specu- lative standpoint, is Southern deferred at 19,c, with L.N.E.R. second preference, at 191, close behind. * * * *
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