Venturers' Corner
To recommend an electrical engineering share at this stage of the trade cycle may seem to be inviting trouble, but I will take the risk and outline the merits, purely as a speculation, of Brush Electrical ordinary stock. This is £roo stock quoted today around £27 or just over 5s. in the £, a valuation which clearly implies that the company has been passing through bad times. Brush Electrical has, in fact, been the big disappointment in the equipment market in recent years, having failed to earn a profit every year since 1930, despite the boomlike conditions which have enabled other similar companies to achieve spectacular recoveries. In consequence, the last balance-sheet, dated June 3oth, 1937, showed a debit balance on profit and loss account of £101,879 and a marked shortage of liquid resources.
What can be said on the credit side ? First, that the board has been strengthened and, secondly, that a stage has been reached when it is practicable to reconstruct the balance- sheet and get down to real business. Obviously the ordinary stock will have to be.written down—I imagine very drastically —and it will be necessary to raise new money. The important point, however, is that the company should again be able to earn profits this year. If the ordinary stock is reduced by 75 per cent. to £25 per Lioo nominal, which should be ample to cover all the necessary writings off, better earnings should enable the ordinary stockholders to see their holdings gradually improve in value. The stock is worth a modest purchase as a lock-up recovery speculation. Cusros.
(Financial Notes on page 941.)
Previous page
