Company Notes
By CUSTOS
THE strong recovery on the Stock Exchange was halted on Tuesday not so much because EDC had ended but because the account had ended with another heavy settlement The fate of Europe is not yet a factor in this bull market. The good news which sustains it is industrial, not political. It may be some official return or some company announce- ment, but hardly a day passes without some stimulating headline in the financial press. This week it was the 13 per cent. rise in motor cycle exports reported for the first seven months of the year which caused a rush to buy ASSOCIATED MOTOR CYCLES. These 5s. shares rose 2s. to 25s. (to yield 5 per cent.). It was only in January that I was recommending them at 16s. 9d. to yield 7.4 per cent., but as I think that an increase in dividend is likely the shares should not be sold. Then there was the issue of loan stock and ordinary shares (one new for every eight) M the tempting price of 27s. 6d. by VICKERS. This share had lately been attracting attention through the huge order the company had received in America for its Vickers Viscount air-liners. At 40s., which is equivalent to 38s. 9d. ex rights, the shares would only yield 3.9 per cent., but the market is expecting the dividend to be raised from 7} per cent. to 10 per cent. on the doubled capital. Similar expectations caused a rise in RANKS LTD. 5s. shares to 15s. 3d. A second interim dividend of 5 per cent. has been declared, making 9 per cent. so far (on the doubled capital) and indicating 15 per cent. for the year. So the news goes on, giving constant backing for this bull movement. At the moment the market excitement is in gold shares.
I HAVE been asked whether it is possible for the investor to take an indirect interest in the developing mines of the OFS without great capital risk and with the benefit -of some current income. The safest way would be to buy the shares of the parent finance company which has floated the best five mines-Free State Geduld, Western Hold- ings, President Brand, President Steyn and Welkom. This iS ANGLO-AMERICAN CORPORA- TION OF SOUTH AFRICA. In addition to its gold interests it controls Rhodesian Anglo- American, which owns the best copper mines in Rhodesia not to mention De Beers and the diamond industry. Its incidental profits on share-dealing in the current year must be enormous. For the year to December, 1953, it earned 98 per cent. and paid 60 per cent. (for the fifth time running). I do not know whether it will increase its interim dividend at the end of this month but the market clearly expects it to pay more for the year, for at 84 it is valuing its 10s. equity shares. on a 3.45 per cent. yield basis. If the dividend were increased to 70 per cent, the yield would be 4 per cent., which is not unreasonable. A junior partner of Anglo- American iS RAND SELECTION CORPORATION which is interested in the same companies and has a right up to 1960 to take a 30 per cent. participation in any new African venture of its parent. Its 5s. shares at 2, are not such a free market but return a higher yield namely 4.3 per cent. because the margin of cover for the dividend is not so good. (Holding companies, however, are entitled to pay out up to the hilt.) In the year to September, 1953, the 40 per cent, dividend was in fact not quite covered but a different picture should be presented in the next accounts. The dividend for the year is declared in November.
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ANOTHER way of participating indirectly in the OFS development is through DE BEERS.
This fabulous diamond company, which is virtually the diamond industry, has been lending money to the developing mines in the form of convertible debentures. The De Beers portfolio of investments must contain an enormous hidden reserve. The diamond operations are considered specu- lative but there has been very little fall in the sale of gem diamonds and unless there is a severe recession in the United States, which is not likely, the directors look for- ward to another satisfactory year's trading. In 1953 the company earned 391 per cent. and paid 200 per cent. There is no sugges- tion that this dividend is in danger. Even after the remarkable rise which De Beers 58. shares have enjoyed they still give the not unattractive yield of 84 per cent. at the present price of 120s.
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