COMPANY NOTES
By CUSTOS
AT this season of the year movements in the stock markets are usually slight and of no significance and business drops to a mere trickle while brokers go drinking healths in the City dives. The only exception provided this year has been the burst of activity in the heavily stagged CONSETT IRON issue, which opened at 21d. premium and rose to 6d. bid. Other steel shares were dull. STEWARTS AND LLOYD, for example, fell to 72s. 6d. cum dividend—to yield about 44 per cent. Profit-taking brought back CANA- DIAN EAGLE OIL from 59s. 3d. to 57s. and I would advise investors to watch for a favourable opportunity to buy these shares. Apart from rumours of bonus distributions, the attraction of Canadian Eagle is its strongly rising profit trend. It benefits from the jump in the spot rate for tanker freights, from the increase in the tonnage of its tanker fleet (50 per cent. up by the end of 1956) and from its expanding turnover (oil consumption is probably 10 per cent. up this year : fuel oil consumption is actually 21 per cent. up). The market is naturally looking for a rise in the Canadian Eagle dividend, which was last the equiva- lent of 2s. 21d. gross. I have described this share as an exotic one, but it looks like being the popular speculation in the New Year.
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HAWKER SIDDELEY have been as low as 44s. 6d. this year and only a month ago were 50s., but last week they touched 73s. 6d. after the announcement of bumper profits and another 100 per cent. scrip bonus, In the quiet pre-Christmas market they have slipped back to 70s. and at this price I think they are worth buying for in- vestment. The company is no longer just a military aircraft maker. Its manufacturing interests are spread over aircraft engines, guided missiles, diesel engines, motor-cars, high-duty alloys and industrial building. And its overseas interests are expand- ing. The total gross profits of the group rose from £9.4 million to £13.8 million for the year to July 31 and net profits from £4.6 million to £51 million. The earnings on the, equity capital rose from 531 to 61 per cent,! and the dividend is stepped up from an equivalent 101 to 171 per cent. The fact that another 100 per cent. scrip bonus is to be paid suggests that the dividend for the cur' rent year will be raised above the equivalent of 84 per cent. on the doubled capital. 11 10 per cent. is paid—a not unreasonable ele pectation—the shares would return a poten tial yield of 54 per cent. at the present pri of 70s. cum bonus and cum the final &J. dend of 121 per cent. The current earnin yield is 17 per cent.
The credit squeeze has had no appre' ciable effect on the trading profits MERCANTILE CREDIT for the year to Septet r ber last. The restrictions on hire purcha were first imposed last February when Ban rate was put up to 41 per cent. In the sum' mer the banks were asked to reduce loan; to hire-purchase finance companies by Iv, per cent. by October 31 and by a further 5 per cent. by the end of December. Mer cantile Credit forestalled this move by rats ing additional capital through a preferene and ordinary share 'rights' issue, which' brought in £600,000. This enabled it t increase its bank and other borrowin from £7 million to £104 million. As a resin' its hire-purchase agreements jumped fro £10.6 million to £14.5 million. The profs from this additional business have still I accrue in the trading account. Neverthele, profits increased last year by 25 per On' and net profits (after taxation) by 37 Pe, cent. The dividend is moved up modest!A from 25 to 271 per cent, on the increaw. capital—out of earnings of 57/ per cent., and more than half the net profits !Jr ploughed back into the business. 11' shares, which are an old recommendel of mine, have recovered from 41 to 54,P which price they yield over 41 per ceo They are a good holding and if they back to around 51 they would be a g0 purchase.
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