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Venturers' Corner
One might have imagined, in the light of the latest accounts and the terms of the capital reorganisation plan, that the ki preferences of the Pullman Car Company would have shown some improvement on their recent price of 125. 6d., but the news has been received with scarcely a flicker in the market.
(Continued on page 159.)
FINANCE AND INVESTMENT
(Continued from page F57.) Under the scheme a holder of the existing LI preferences is asked to accept 14s. nominal of 5 per cent. cumulative income stock and 6s. nominal in new "A" ordinary shares which seems to me a reasonable proposal in relation to the arrears of dividend, which are to be cancelled, and the company's earning power. Now for the year ended Sep- tember 3oth, 1937, Pullman Car's net receipts rose by £8,613 to £81,75o, a reflection partly of increased Continental travel and partly of an improvement on the London-South coast service. Working expenses were higher but were more than offset by the larger number of passengers carried.
The important point is that on the basis of these earnings, which I understand do not flatter the present position, the 5 per cent. dividend on the proposed new income stock would be covered four times over and there would be a balance of roughly 20 per cent. earned on the heavily written- down ordinary capital. It is surely difficult in these circum- stances, even allowing for the fluctuating nature of luxury travel, to value the 145. nominal of income stock at less than I2S. to give a yield of nearly 6 per cent., or the 6s. nominal of ordinary capital at less than 4s., at which the indicated earnings yield, before depreciation, would be 3o per cent.
' Adding the bits and pieces together, and excluding the 3f per cent. or 6d. net of dividend to be paid in respect of the past year, there is 16s. worth of shares coming to the holders of the existing preferences now standing at I25. 6d. I am not suggesting, of course, that immediately the new income stock and written-down ordinaries are quoted on the Stock Exchange after the scheme has gone through, the difference will fall into a buyer's pocket. But I do suggest that the existing shares are undervalued and that over a period a capital profit, as well as a good income return, should be
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