Striking prospects
PORTFOLIO JOHN BULL
British Petroleum has stopped being an out- and-out speculation and has become a pretty serious investment proposition again. Mean- while this column, together with the British government, Burmah Oil, RTZ, lots of Ameri- can investors and large sections of the City, has had a pretty good ride up in the shares from around the 100s mark to 140s or so.
You can now quantify the Alaskan strike, though not at all precisely, and a good guess of what size of profits the 10,000 retail sta- tions in the us will produce is in order. And the latest profits for the group as a whole provide an up-to-date starting line.
To take the last point, BP'S net profits in 1968 came out at just over the 100 million mark, a good result, 15 million better than the
City had been expecting and £10 million better than looked possible six months ago.
It cannot be said too often that BP is a transformed company. Not only has it ac- quired crude oil and marketing outlets in the United States, the most profitable market in the world, but the huge size of its Alaskan deposits provides it with a borrowing base which revolutionises its financial positio5, hitherto under some strain. Alaska will not only finance itself, but finance a good many other BP projects right round the world.
At the moment the London market is rest- ing on the view that BP's oil field will turn out to be one third the size of Atlantic Richfield's, which has been estimated at 5,000 million to 10,000 million barrels, and that production will not start in earnest until 1972, possibly 1973. My own unofficial information is that these guesses will turn out to be conservative. The field is bigger than yet indicated and BP'S own share likely to be more than one third Atlantic Richfield's. I can also see BP getting-its Alaskan oil away in 1971. Certain4 the company got North Sea gas ashore well ahead of schedule. The shares (in my second pprtfolio) are a hold.
So are J. Lyons (first portfolio) after their recent forecast of higher profits. In their pre- vious 'statement the directors had shown little inclination to forecast an improvement but in the event the expected out-turn for the year is £4.4 million compared with £3.78 mil- lion last year. And taking the second six months alone, profits expanded at an annual rate of 21 per cent. I also like the way the company is financing acquisitions by selling low-yielding properties, for that has a healthy impact upon the -profit and loss account. Thus at 80s the shares now appear to be selling
Valuations at 1 April 1969 First portfolio 100 Empire Stores at 69s £345 125 Phoenix Assurance at 43s 9d £273 330 Witan at 22s 6d £371 500 E. Scragg at 21s 3d £531 500 Clarkson (Engineers) at l&s 94 .. £469 60 Rio Tinto Zinc at 146s 64:1 £440 1,000 Associated British Foods at lOs 53d £522 1,000 Jamaica Public Service at 6s .. £300 200 Associated British Picture at 33s 9d £337 100 Lyons 'A' at 84s 64 £423 200 British and Commonwealth Shipping at 42s 9d £427 200 Forte's Holdings at 45s 3d .. £452 400 Bowmaker at 27s 3d • • .. £545 1,000 English Calico at lOs £516 Cash in hand .. • • .. £1,064 /7,015 Deduct: expenses £246 • Total £6,769 Second portfolio 600 Pillar Holdings at 19s 3d .. .. £577 15 Kaiser Steel at £36 8s .. .. £546 250 Lonrho at 64s .. £800
100 British Petroleum at 136s 94 • £684
300 Vosper at 23s 94 .. £356 1,000 Allied Breweries at 20s 94 .. £1,037 300 J. Bibby at 32s 64 .. .. £487
Cash in hand •• •• •• • f1,459
£5,946 Deduct: expenses £173 Total £5,773 at around fifteen and a half times earnings, which takes nothing for granted. And the coming scrip issue will improve marketability. In some ways the property sales are the most significant development. Lyons is the greatest underdeveloped property business of all. Assets are officially estimated to be about the 128s a share mark, but my guess is that on an up-to-date valuation they would be worth 160s a share. You can say that asset backing means nothing without profits, which is quite true, but asset backing counts when the manage- ment concerned seems keen to unlock some of the riches. In the case of J. Lyons, it is just this encouraging attitude which I detect. As with Bp, I hold these shares.
I have been collecting some brokers' opinions on my ancient first portfolio holding in Phoenix Assurance. Phillips and Drew commented in their December review that at current levels 'we regard Commercial Union, Guardian Royal Exchange and Royal as the most attractive of the larger offices, and the scope for the development of the smaller Phoenix seems considerable.' Phoenix, how- ever, is not among Simon and Coates's list of favourite insurance shares, which adds General Accident and Prudential 'B' to Phillips and Drew's list. Simon and Coates seem less con- fident of the good effects of the link with Con- tinental Insurance Company of New York than some. Finally W. Greenwell's survey shows that Phoenix's dividend cover is stronger than most. Rest content.
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