* *
PROSPERITY IN SOUTH WALES
These are better days for industry in South Wales. Tinplate is booming and the coal trade, despite rising costs, is doing well. Investors will naturally turn their thoughts to such companies as Richard Thomas and try to estimate the recovery possibilities. The answer, I think, is that this field offers some good bargains. The tinplate trade, it seems, is now working at over 70 per cent. of capacity, prices have improved, and there is a record volume of orders on hand. The conclusion one must draw is that Richard Thomas & Co., with its brand new plant at Ebbw Vale able to operate at an economical level, must be making good money. The 41 per cent. debentures, at 78, should there- fore turn out a good holding to yield 51 per cent., and I see no reason why the more speculatively-minded should not consider the Li preferences at 12s. 6d. Under the reorganisation scheme these preferences are entitled to a non-cumulative dividend of 61 per cent., but on October 2 the board announced that they were unable to recommend payment of any dividend for the half-year to September 3o. During that period conditions had not been easy and the decision was readily understandable, but some payment should be forthcoming at the end of the financial year. When the 61 per cent. is being earned—and that may not be far off—the shares should be worth something nearer their par value than 12s. 6d.
Among the coal shares Ocean Coal and Wilsons 4s. ordinaries, at 2S. 3d., look to me a cheap speculation. Costs in the coal trade are rising but so are selling prices and so is output. This company should be getting the benefit of its large improvement programmes in recent years and should also be feeling the effects of the revival in export demand. For 1938 the ordinary shares received a dividend of only 1 per cent., but in 1937 the rate was 31 per cent. Among the higher-priced coal shares Powell Duffryn Li ordinaries are probably as good as any at 16s. 6d. For the year ended March 31 the dividend is 6 per cent., so that the yield indicated is nearly 71 per cent. This rate of dividend should be comfortably maintained in present conditions.
Previous page
