25 OCTOBER 1963, Page 32

Investment Notes


IHE fact that the market ended slightly down in trading this week did not imply any lack of confidence in the new Premier. The City be- lieves him to be a better election-winner than Mr. Macmillan. The market was due for a tech- nical correction after the steepest rise it has enjoyed for a very long time. It is now within a pOint or two of the 345.2 high level of June, 1961. A ten-point correction would not be out of place. However, if company reports continue good, the market looks as if it will ignore the election risk until after the Budget Of recent reports, BROOKE BOND has been outstanding. For the year to June, 1963, profits before tax were 15 per cent up and after tax nearly 20 per cent up. The profits include the first full year's profits from Doom Dooms. The company now has one- third of the British tea market, which is highly competitive, but is rapidly expanding its over- seas business in the Far East and Africa. Allow- ing for the political risk, the yield of 4.1 per cent is not unduly high, but with a one-for-four scrip issue and a 2.8 per cent dividend cover, the market believes that a higher, return will follow. I cannot agree with the market's op- timism about WALL PAPER MANUFACTURERS. It may well be that the new wallpaper cycle starts this year with the new pattern books, but ICI is now a competitor in wallpaper as well as paint, and with last year's profits down nearly 20 per cent, I think the shares are discounting some recovery after their rise to 20s. to yield 4+ per cent.

British Relay Wireless

I have been reading a broker's case for BRITISH RELAY WIRELESS AND TELEVISION, which is well made out. The relay companies send out broad- cast transmissions by wire to the houses of their customers, where special sets convert these sig- nals into either sound or television. The com- pany's television sets carry a guarantee to receive the BBC's new second programme, which begins in April next year, without additional cost to the subscriber. Unlike ordinary television sets, they can be easily and cheaply adapted to repro- duce the 625-line pictures. The company now has over 12,000 miles of cable in relay use in areas from Scotland to Southern England where they have been able to obtain local contracts. In addition the company has a fast-growing rental business and retail shops selling electrical goods. The rental companies are affected by the problem of sets which cannot be converted and by the trading loss on reduction in purchase tax last January. Last year BRW changed its ac- counting methods, which resulted in an over- provision for depreciation of nearly £1 million. This was sufficient to cover the reduced value of their rental television sets. The shares are now ex the rights issue of one-in-four and at 23s. 3d. return 3.6 per cent. on dividends. This is a share to watch for purchase on any market reaction.

Rank Organisation

Dealings have started in the new RANK ORGANI- SATION ConVertible at 16 premium. The stock is convertible on the basis of thirty-three 'A' Ordin- ary for every £100 Stock in 1965 down to thirty shares in 1967. The old convertible at 167 is on the basis of sixty shares in December, 1963, down to fifty-five in December, 1965. These con- vertible debentures overlap and seem dear in relation to the 'A' shares, which have come back to 55s. 6d. to yield nearly 2+ per cent. Another share to watch for any market reaction.