COMPANY NOTES
By CUSTOS
THE sharp fall in the Treasury bill rate to £5 4s,' per cent., which followed on the cut in the Federal Reserve discount rate from 21 per cent. to 11 per cent., has made the gilt-edged market more than ever convinced that another reduction to Bank rate is imminent. If it were not for the restraining influence of strike threats prices would be moving up somewhat faster than about day. In spite of this strength New Zealand has had to issue its £20 million loan with a 6 per cal' coupon at 99. New Zealand is having balance of payments trouble and the high cost of borrove ing is the price of its difficulties. But let no investor suppose that these high-yielding bond issues cae remain much longer with world interest rates, falling. We should all buy them while the going good. PYE gives us another opportunity this Wee` for it is raising £21 million with a 6 per cal' stock at 98.
* * * The equity share market has been busy sorting out the companies which will benefit most front the change in profits tax. The two shares I reconY
Mended last week have had sharp rises-3s. 6d. on GUS 'A' now 44s. 6d., and 2s. 4cl. on HOOVER 'A' raw 38s. 3d. The new profits tax is estimated to increase GUS earnings from 146 per cent. to 151 Per cent., and in view of the 100 per cent. scrip bonus, which the Capital Issues Committee have now allowed, these shares seem likely to move higher when ex bonus. One of the chief benefic- iaries of the tax change is CITY OF LONDON REAL PROPERTY which has been distributing slightly more than it earns. Its earnings will rise by no less than 50 per cent-namely from 8 per cent. to 12 per cent. and its 9 per cent. dividend will now be reasonably covered. The shares rose from 27s. 6d. to 30s. 3d. to yield 5.85 per cent. Another company to gain appreciably is BRITISH MOTOR CORPORATION, whose earnings will rise from 11-1 Per cent. to 15-I per cent. The market, however, Was disappointed by the repetition of the old interim dividend of 4 per cent. and the shares came back to 7s. 6d. to yield over 8 per cent. FORD, on the other hand, is adversely affected by the tax change. Sir Patrick Hennessy, however, the chair- man of Ford's, stated at the annual meeting that current production was going 'all out' at the rate of seven days a week 'full overtime.'
Oil shares have been going ahead but remain very jumpy and are best left to speculators for the time. BRITISH PETROLEUM, whose 15 per cent. tax-free dividend and negligible fall in net Profits had been expected in the market, has now to face the next threat to Middle East peace coming from Aden, where it has a huge refinery. Rumour occasionally credits BP with the deter- mination to take over ULTRAMAR, whose shares have risen sharply to 71s. from a low point of 41s. 6d. not so long ago. These are ideal shares for the nimble speculator in view of their wide fluctuations. If the oil investor wants to get rid of political risks he should buy CANADIAN EAGLE. The market is expecting good results for 1957. It Will be recalled that in 1956 the company's net Profits increased by over 22 per cent., earnings amounting to 6s. a share. The dividend was in- creased to 2s. a share and may well be advanced again. At 53s. the dividend yield is nearly 5 per cent. and the earnings yield about 114 per cent.
The full report of IMPERIAL CHEMICAL INDUS- TRIES justifies its claim to be the investor's favourite company. The sustained increase in sales is proof that a policy of high investment pays. Capital expenditure last year was about £50 mil- lions for the company and £67 millions for the group. This year capital commitments are slightly lower but the company is not 'letting up' in its expansion programme and has just authorised four major projects. The chairman was more cautious about 1958 prospects, although home sales in the first quarter were still rising, but with earn- ings of 324 per cent. there is room for another slight increase in the dividend which is now 12 per cent. At 43s. 9d. the shares yield 5.45 per cent.
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My recent recommendation of OLYMPIC PORT- LAND CEMENT shares at 30s. turned out to be a lucky break. A buyer is negotiating with UNITED MOLASSES for their controlling interest (62.8 per cent.) in this . company, and if the deal goes through a cash offer will be made to the outside shareholders. The price of Olympic has been rising in anticipation of this agreement, and as I Write the market quotation is 55s. 'buyers only.' 1 hope some readers took advantage of my recom- mendation which was made quite without know- ledge of this deal.
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