COMPANY NOTES
By CUSTOS
THE advent of the conventional silly
season is having its effect on the se-
46:; curity markets. Shares which are the subject of exotic press comment are going up and down like Mr. Todd's balloons. The staid gilt-edged market is still sour; tobacco shares have met with a lot of small selling after the Government's cancer statement—the big holders are wisely waiting until the scientists announce a 'safe' cigarette—and the solid industrial and oil shares are still tending to ease. The field has been left to the speculators in lake-over bid' shares in the retail trade. The already fashionable buying of store shares received a strong impetus from Mr. Fraser's bid 'for JOHN BARKER. His offer of four HOUSE OF FRASER 'A' shares (around 27s. 3d.) plus 10s. in cash for one John Barker caused the latter to jump to 117s. 6d. against 77s. 6d. on June 21. Profit-taking brought the price back to 107s. 6d. If Mr. Fraser can really make John Barker worth even that figure by clever manage- ment and trading he will have the shareholders' blessing, but the big institutional shareholders, including the Church of England (13,800 shares), are critical of this bidding for control in 'A' shares which hold only one vote for every twenty. The Stock Exchange Council could stop this undesir- able practice tomorrow by refusing a quotation to non-voting shares when they exceed more than a certain proportion of the total capital. A rush after GAMAGES shares, which sent the price up 25s. atone time to 75s., was started by the city editor of the Sunday Express, who tipped the next 'bid' as likely to come from Mr. Isaac Wolfson at about £4 for each Gamage share. Certainly the trading prospects of Gamages have been improved by the rebuilding of adjacent city offices but unless Mr. Westropp had direct and certain knowledge of Mr. Wolfson's plans he should not have released this story—or the Stock Exchange Council should have suspended dealings until the facts have been disclosed. At the moment of writing Gamages are back from a peak of 75s. to 59s. It makes one dizzy.
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Rumours of bidding for control by American interests have been responsible for the remarkable rise in ULFRAMAR 10s. shares to 100s. 6d. In 1950, when the company ran into financial trouble, the shares were as low as Gs. 4-12d. (their previous high was 85s. in 1948). Outside the Royal Dutch-Shell group Ultramar is the only British producer in Venezuela which the Americans could covet, but I am quite unable to say whether 100s. 6d. is a reasonable price or no. Another oil share which I cannot value is CANADIAN EAGLE, which has been bought by continental and American speculators 131) to 89s. (bearer) and 85s. 3d. (registered). The report of Canadian Eagle was impressive. but it would be difficult for the layman to find out exactly. how the company makes its huge profits. Its share of the production from the Meese Grande field in Venezuela, in which it has an 8.1- per cent. interest, rose by 16 per cent. and it lifted more oil from the Middle East through its long-term Kuwait agreement. But its marketing profits fell both in the UK and in South America. Profits on shipping improved, but in view of the recent slump in tanker freights this can hardly be the case today. What, then, ex- phins the continual demand for the shares which has forced the price up to 85s. 3d. to yield under 3 per cent. on the gross equivalent dividend of 2s. 6.2d. per share? Apparently it is due to some very bullish brokers' circulars. I have seen one which estimates a 15 per cent. rise in the 1957 earnings over 1956 and then multiplies these earnings per share by the average ratio between earnings and high and low prices of the past three years. This gives a high of 94s. and a low of 62s. To these are added the value of the company's oil reserves (at 30 cents per barrel) in the new Maracaibo Lake field, which brings the estimated value of Canadian Eagle up to a high of 140s. 2d. and a low of 108s. 2d. against the present price of 85s. 3d. I regard this as a wishful- thinking calculation. The underlying strength of the shares is that trading profits increased last year by 26 per cent., that the amount distributed as dividend represented only 32.3 per cent. of con- solidated earnings against 34.4 per cent. in the previous year and that substantial cash assets lie behind the equity capital. But with the compli- cated varying percentages held in the share capital of its associated companies it is impos- sible to assess the real value of the shares. Frankly, the shares are worth just what the Royal Dutch-Shell group chooses to make them, for it
is the group which decides the price at which th company acquires its oil and the price at whicl it sells its products.
• 4, I was rather too optimistic in expecting tha the time was nearly ripe for averaging on pape shares. The chairman of A. E. REED in his annul statement declares that the volume of new plan being installed in the world paper industry an due to come into production in two or thre years' time may well mean that the demand ft paper products will be temporarily overtake, This company, of course, will weather the storm although its 16 per cent. dividend is not so we covered as it was. It is reassuring to note that 7i per cent. of its group sales is covered by wrappin; paper and packaging, only 8 per cent. being fo newsprint. At 45s. 6d. the shares now yield ove 7 per cent. WIGGINS TEAPE with a slightly stronge dividend cover (1.9) yield 7.2 per cent. at 48s. 6d and INVERESK PAPER at I Is. 9d., with the stronges dividend cover of all (4.0), yield 7.1 per cent. Th( paper group, with these high yields, will probably attract investment buying if the market falls an farther-in spite of the cautionary remarks of thi paper chairmen.
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