COMPANY NOTES
By CUSTOS
AFTER, its sharp advance it is good to see the Stock Exchange react and quieten down. The dock strike and the weakness of the t are holding back fresh buying, but no great selling has materialised and it would seem to be a normal reaction for a bull market. Looking back over the past six months I still favour three of the four groups I selected last December, namely, steel, oil and paper-making. Steel shares have come back sharply on profit-taking and I would not buy again until the talked- of 'denationalisation' issue of the Steel Company of Wales is announced, which may have a depressing effect. Oil shares can be bought on market reactions, but in- vestors must now be wary of American buying and selling, which are making the market in BRITISH PETROLEUM more specu- lative than it should be. For , the same reason I fight shy of BOWATER PAPER except the new shares for a short-term holding which American holders have not been allowed to take up. 1 have previously recommended INVERESK PAPER—at 12s. 9d. last November—and at 18s. 6d. they have probably not yet discounted the expected larger dividends for the current year to September. WIGGINS TEAPE is worth atten- tion at 74s. 6d. A 'rights' issue is pending— the capital is being increased by one million shares—to finance the construction of a wood-pulp mill near the River Severn Tunnel which will use mainly home-grown hard woods. This is an important develop- ment which will save the nation dollars. The chairman reports that profits for the opening months of the year show a con- siderable increase over those of the previ- ous year when 40 per cent. was earned and 171 per cent. was paid. It looks as if 20 per cent, might be paid for the current year. In that event, disregarding the value of the
rights, the shares would return the attrac- tive yield of over 51 per cent.
The six blue chips I selected last Decem- ber—ASSOCIATED PORTLAND CEMENT, METAL BOX, IMPERIAL CHEMICAL, ASSOCIATED ELEC- TRICAL, ENGLISH ELECTRIC and HAWKER SIDDELEY have had huge rises and are now attractive to buy only on sizeable reactions. For example, METAL BOX came back from over 130s. to 120s. It is still cum the rights issue of two for five and cum the 100 per cent. bonus. What should be allowed for the rights is only guesswork, but say 10s. and we get an ex bonus price of 55s. What will Metal Box pay for the current year? Profits, I believe, are still rising and more than the equivalent 10 per dent. could reasonably be expected. Say 12i per cent. and the potential yield becomes over 44- per cent., which for a leading growth equity is much higher than is usual today.
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A company which participates unex- citingly in the growth and prosperity of British traders is INITIAL SERVICES, supply- ing towel, tea and other services to firms who are too busy to look after these particular needs of their employees. The company has greatly extended its laundry services and now supplies buttoning machines to general laundries. Initial Ser- vices have just reported their results for the year to March, the net profit being 57 per cent, higher at 076,000. The dividend is raised from 25 per cent. to 35 per cent. and a one-for-two scrip issue is proposed. At 32s. 6d. the 5s. shares return a dividend yield of 5.4 per cent. and an earnings yield of nearly 10 per cent. Initial Services should continue to prosper, but I do not look for any spectacular rise in the shares.
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