RUBBER SHARE VALUATIONS
The sight of rubber drifting rather aimlessly below 9d. per lb. is anything but pleasing to the speculative holder of rubber shares, but should not worry the long-term investor. The setback in the commodity has surprised both Mincing Lane and the Stock Exchange, where most students of the statistical position had satisfied themselves that a price nearer is. than 9d. would be comfortably held during the slack season. The increasing evidence that Malaya is succeeding, against all expectations, in producing right up to her quota, has brought the change of sentiment in the market. Added to which the American trade buyers, sensing the declining trend, have held back their orders, and short-time speculators who bought heavily two or three months ago have been forced to apologise and cut their loss.
What are the prospects ? Frankly, I think that, without being exciting, they are reasonably good. Good enough, in any case, to justify rubber shareholders in holding on for better prices. Even with the commodity quoted at 9d. per lb. most companies can make profits which indicate an average earnings yield of over 12 per cent. in relation to current share prices on the Stock Exchange. If the companies pay away in dividends only one-half of their available net profits, the average yield based on dividends will be over 6 per cent. This is surely a reasonable market appraisal of the current position and suggests that there will be scope for a good recovery in share prices whenever rubber moves back towards rod. per lb.
* * * *
Previous page
