Investment Notes
By CUSTOS
/rile gamble in steel shares goes on, but it 1, is hardly fair to call it a gamble. It rep- resents a shrewd assessment of the political and financial situation arising in October out of a Labour victory. The renationalisation of the steel companies is not likely to be carried out on the basis of net asset value which is well above market prices except in the case of JOHN SUMMERS. Or on the basis of the de-national- isation price adjusted for 'rights' and scrip issues and retentions of profits. That again would be too far above market values. The average market price over a period seems to be the reasonable choice. The gamble is over the period. All the shares except smwaturs AND LLOYDS are stand- ing below the average price for the past five years. As no one can assess this risk some specu- lative investors are going for the shares which would rise most in the event of a Conservative victory. This would give the palm to SUMMERS, STEWART'S AND LLOYDS and UNITED. Perhaps a pin stuck in the group on the back page of the Financial Times would do as well.
Plaster and Beer
Here are three shares which will flourish irre- spective of politics. BRITISH PLASTER has pro- duced an excellent report with profits up 40 per cent and equity earnings up from 16 per cent to 221 per cent. With the dividend raised to 101- per cent the yield at 27s. 3d. is 3.8 per cent on dividends and about 8 per, cent on earnings. The building boom is mainly responsible for the upturn but paper and •packaging now account for nearly a quarter of the turnover. The com- pany is linked up with US Gypsum on research and if it can produce a board which will do as substitute lining for plaster it can break into a fresh market. The other shares are ALLIED BREWERIES and SCOTTISH AND NEWCASTLE, the first yielding 4.3 per cent on dividends and 7.9 per cent on earnings and the second 3.9 per cent on dividends and 7.8 per cent on earnings. Scottish and Newcastle have just reported a 30 per cent increase in pre-tax profits for the half-year. There is no doubt that the coming election will cause a lot of beer, whisky and wine to be drunk. April saw the highest beer output since 1947. DISTILLERS, recommended last week, should perhaps be added to this list.
British Sugar
This company was a constant recommendation of mine before it was freed from the Govern- ment agreement—and before the Sugar Board 'stole' 25 per cent of the equity. The capital is now to be doubled to £10 million by a one-for- two scrip issue and the Sugar Board takes £21 million of it. The usual dividend of 7 per cent was paid in respect of the year to March. A dividend of 31 per cent is forecast on the present capital for the half-year to September and for the year to September, 1965, a dividend of 6 per cent is forecast on the larger capital— equivalent to 9 per cent after adjusting for the scrip issue. So at 32s..6d. the £1 shares yield 51 per cent, which is no more than they should. On an asset value they are worth much more, but I cannot see the market getting excited about it for .a long time. It seems the end of the story for the present--until a new board is elected and the company is revivified.
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