FINANCE AND INVESTMENT
By CUSTOS
ONE has grown so accustomed to the leadership of gilt-edged in the stock markets that it is a little surprising to find equity shares not merely stealing the limelight but keeping it. For several weeks the weight of buying in Throgmorton Street has shifted from gilt-edged to equities, with special emphasis on home industrials, oil and diamond shares. Gilt-edged have been steady but inanimate. If the equity buying were the result of inflation fears, this change might have serious implications. I do not think it is. It seems to me to be based mainly on such influences as search for income yield, eager desire for capital appreciation, and growing willingness to pay for post-war recovery prospects. One of the basic factors in the support for home industrials is, of course, the widespread confidence that our industries can now stand up to enemy air activity.
SCOTTISH BANKING PROFITS Banking in Scotland is not quite the same thing as in England and Wales, but the main influences on earnings are the same. I feel, therefore, that the results announced by the Royal Bank of Scotland, which has substantial interests south as well as north of the Tweed, are a pretty reliable guide to what one may expect from the Big Five. Net profit after tax for the year to October 14th has fallen from £557,359 to £491,522, which implies that higher expenditure, apart from heavier taxation, has been reflected in the bank's earnings. Deposits have risen by about £7,00o,000 to just over £82,000,000, but the whole of this increase and the reserves released by a further L2,000,000 fall in advances have been absorbed in an addition of £4,000,000 to Treasury Deposit Re- ceipts, and purchases of Government securities, this bank's invest- ment portfolio having risen from £28,900,00o to £34,765,000. The balance-sheet position is strong; and the management good. At 425 Royal Bank of Scotland £too stock yields 4 per cent, on the 17 per cent. dividend. It is a sound holding.
KAFFIR DIVIDEND PROSPECTS Speculative activity in the shares of developing gold mines has been in marked contrast in recent months with the lack of anima- tion in the well-established Kaffir dividend-payers. While shares like Blyvoors, Libanons and Western Reefs have had spectacular rises, there has been very little movement in seasoned veterans like Crown, Brakpan and Geduld. One of the reasons is doubtless the absence of the Continental buying which in pre-war days was a reliable stand-by of the Kaffir market.
Investors wishing to have a stake in the developing mines without running too much risk may like to consider the shares of the Kaffir finance houses. It is plain from recently issued accounts that these concerns are now much more comfortably placed than a year ago, thanks to the recovery in market values. Consolidated Gold Fields returns profits for the year to June 30th of £353,824, against £345,210, and maintains its dividend at to per cent. New Consolidated Gold Fields, the operating company which supplies the revenue, has a reserve of £I,000,000 apart from the hidden reserve in the surplus of market values over the book figure of investments. At 45s., Gold Fields £1 shares yield 41 per cent.
PREFERENCE SHARE WITH ARREARS
For the speculatively-minded who are seeking depressed shares paying dividends and offering scope for capital appreciation, I think the position of North British Rayon is worth investigating. This company has just issued accounts covering the year to June 30thi They show profits, subject to E.P.T., which cover the full 6 per cent, dividend on the los. preference shares by a
large margin. Accordingly, a half-year's dividend is to be paid on January 1st, and the board is hopeful that subsequent pay- ments will be met regularly. It is also expected that a scheme to deal with outstanding arrears, which date back to December, 1937, will be brought forward as soon as the E.P.T. position has been cleared up. With four year,' arrears, equivalent to about Is. 3d. net, included in the price, these 6 per cent, cumulative los. preferences look under-valued at 6s. 3d.
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