Company Notes
By CUSTOS ANOTHER set-back has been seen in the stock markets—this time on the Chinese incident—but it was again noticeable that selling dried up on the fall in prices. This may be taken as proof that there is no fundamental change in trend. Several shares have, in fact, reached new high levels. For example, BOWATER PAPER rose to 77s. 6d. before going 'ex bonus' of one-in- three. This was on the chairman's statement at the meeting that a further small bonus was possible next year. If the dividend is maintained at 16 per cent. on the increased capital the dividend yield would be 5i per cent, but I think this is no higher than it should be in view of the heavy prior capital which makes this equity 'highly geared' and more speculative than others. Looking back I see that Bowaters have doubled in price over twelve months and I could not therefore dissuade fortunate holders from taking some of their profits. Other paper shares have been strong. A. E. REED, which I have previously recommended, rose on the acquisition of an interest in COLTIIROP. If Reeds can pay 105s. for these shares Colthrops are probably worth much more.
• * • THE sharp recovery in profits of GENERAL ELECTRIC puts that share back into the class of 'blue chips' with a higher than average yield. Its trading year ended in March and net earnings for the equity were doubled, the dividend has been raised from 111 per cent to 121 per cent. and is covered about 21 times. The shares rose sharply to 50s. at which price the dividend yield is 5 per cent. This compares with a dividend yield of only 3.8 per cent. on ASSOCIATED ELEC- TRICAL (covered 3.8 times) and 4 per cent. On ENGLISH ELECTRIC (covered 2.5 times). I am not suggesting that these two shares should be sold but that GEC should be bought, being worthy of a lower yield than 5 per cent. GEC covers, of course, a much wider field in consumer goods than either AEI or EE which depend mainly on capital goods. Competition is keener in consumer goods and profit margins are smaller. In 1952-53 GEC felt the recession in the con- sumer trades and trading profits fell from £6.6 millions to £4.2 millions. The recovery to £5.8 millions last year showed that con- ditions are now more stable both in the home and export trades and it will be interesting to hear what the chairman has to say about the current year's prospects at the meeting on September 23. Meanwhile the shares might be held with confidence. THE 5s. shares of PYRENE SCCIII well worth acquiring both for capital appreciation as well as income. The company manufactures and sells fire-fighting equipment and rust- proofed bumpers for motor cars. It is also engaged in the sale of chemicals for the prevention of rust and corrosion of metals. It is impossible to say which branch con- tributes most to its net profits but this year its prOduction of bumpers must be reflect- ing the record output of the automobile industry 'while the fire-fighting department should be going ahead with the develop- ment of its new method of generating mechanical foam. I understand that the Air Ministry has recently placed a contract with the company for crash tenders equipped with the new Pyrene foam-making appliances which can throw 6,000 gallons in li minutes at the maximum rate of discharge. This contract may well be the forerunner of other Air Force contracts. In January last the company acquired the whole of the capital of the Pyrene Company of Canada yvhich produces fire-fighting equipment and non-skid tyre chains. This is expected to contribute materially to profits• in later years. In the calendar year 1953 gross profits rose by 15 per cent. but EPL at £80,000 took nearly £20,000 more, reducing the amount earned for the equity from £188,800 to £182,100 or 57.6 per cent. Dividends were raised from 171 per cent. to 221 pet cent. and as EPL absorbed more than was actually paid in dividend it is reasonable to expect an increase in the cash distribution this year. At 22s. 11d. the shares return 5.1 per cent. on dividends and nearly 18 per cent. on earnings if EPL is added back. This is attractive for a s with growth. aaiiil •
THE present prosperity of the paper- should be reflected in the next accounts o ALDERS (TAMWORTH) Which are made up to October 31. The company's mills arc at Tamworth and Sandford near Oxford and they produce special papers, Kraft wrap- ping paper and corrugated board. In the previous year, the Company earned nearly 48 per cent. and paid 224 per cent. Thus at 8s. 3d. the 2s. shares return a yield of nearly 12 per cent. on earnings and 54 per cent. on dividends. A capital bonus of 50 per cent. was distributed in June, 1952. A sound share of small denomination is always of interest to the small investor and I suggest that Alders (Tamworth) is one that should find a place in the small portfolio.
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