Investment Notes
By CUSTOS ALL those who disliked Mr. Chambers's ..aggressive take-over bidding will be de- lighted that ict only obtained 371 per cent. of COURTAULDS. In spite of the big institutional preference for ICI loan stock it was the small investor who saved the day for Courtaulds. I am sure that it is in the best interests of the country that the two companies should remain distinct, but peaceful co-operation is now essen- tial. ICI will be well advised not to try to secure control by buying Courtaulds in the market. Now that the storm is over the market expects Courtaulds non-assented to come back, but I do not expect a great fall. On any sizeable reaction the shares would be a good short-term specula- tion. The same applies to ICI in view of Mr. Chambers's forecast of ten years' rapid growth' in chemicals.
Wilmot-Breeden Our motor component companies should do well in the Common Market and wiLmor- BREEDEN is therefore sure of a good response to its rights issue of one-for-ten at 10s. to holders of the ordinary and 20 per cent, redeemable preference shares. The profits for the year to December, 1961, have fallen from £1.6 million to around £1 million, reflecting the 26 per cent. decline in the UK motor-car production, but this year is expected to bring a marked recovery. As everyone knows, Wilmot-Breeden is the lead- ing manufacturer of locks, door-handles and window mechanisms for the motor industry and has subsidiary interests in aircraft engines, gas turbines, hydraulic equipment for commercial vehicles, etc. Considerable investments have been made in both France and Italy (thanks to French and Swiss loans) and a 45 per cent. in- terest (later to be raised to control) has been acquired in an Italian company manufacturing motor components, a large proportion of which will be designed by Wilmot-Breeden. On the 1961 profits forecast, the ordinary share earnings should be around 14 per cent., giving 11 times cover for the 111 per cent. dividend. For 1962 the directors forecast a minimum of 111 per cent. on the increased capital. The ordinary shares are quoted at 17s. 3d. ex rights to yield 3.2 per cent. and the 20 per cent, redeemable preference shares, which I have previously recommended lower down, arc now quoted at 18s. 11d. to yield 51 per cent. These shares are convertible into the ordinary share for share between October and December, 1963 and 1964.
Convertible for Recovery One of the best recovery shares in the steel market is JOHN SUMMERS, whose chairman has just said that demand for their flat-rolled pro- ducts has improved in recent months. Trading profits for the first four months of 1961-62 were close on those in the comparable period of the last financial year and earnings for the full year to next October should compare 'not unfavour- ably' with those for 1960-61. This ensures a favourable response to the surprise 'rights' issue of 61 per cent. convertible stock 1976-78 at 99 (in the ratio of £37 of convertible for every £100 equity). Conversion into the equity is to be offered in March between 1964 and 1966 on a basis which gives an effective cost of 53s. 6d., 56s. 6d. and 60s. The shares closed at 49s. to yield 6 per cent on the 15 per cent. dividend, last covered over twice. Last year they were as high as 68s. 6d.
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