COMPANY' NOTES
By CUSTOS
MR. BUTLER'S optimism at the Mansion House dinner—a sentiment where restraint is not apparently to be intensified—helped the gilt-edged market up half a point or more,' but industrial equities relapsed into their disquietude. The fact that the Finan- cial Times index has fallen below 190 makes me think that it will now decline until it reaches its March low level of 1754. I have always thought that excessive optimism which carried the index up from 1754 to 224 in July would, have to be wiped off the market slate. This is the time to put profits and cash into Government bonds. Happily, dear money has at last been allowed to encourage the small saver. From the begin- ning of next month -4 per cent. Defence Bonds will be on sale at the Post Office encashable on three months' notice, at 101 if after five years and at 103 at the end of ten. It is time ,that the Post Office Savings Bank 'allowed more than 24 per cent. or allowed it free of tax on the first £50 of interest. The net yield on Savings Certifi- cates if held for ten years is just over 3 per cent., which is equivalent to 5.3 per cent. grossed up at 8s. 6d. tax. If the small saver would only consult a stockbroker he would find still more attractive short-dated bonds obtainable in the market. I have more than once called attention to Exchequer 2 per cent. repayable at par on February 15, 1960, which can be bought at 92A to yield 24 per cent. flat or 64 per cent. to redemption if the tax-free capital gain is grossed up at 8s. 6d. tax. To the surtax payer these bonds are a gift from heaven. If his tax works out at 12s; in the £ the true gross redemption yield would be 74 per cent. The wise rich man would have cashed in his profits when the 'blue ,chip' market turned downward, as we advised on this page, and put the
money into Exchequer 2 per cent.
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As the low-yielding 'blue chips' will now feel the money squeeze more than the high- yielding shares in the second grade, I have tried to give each week an example of a high-income share of good quality which will stand up well to the present downward trend. Here is one in a market already de- pressed and deflated—DAVID WHITEHEAD &
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Before the merger CLAN LINES vier: quoted at 74 to yield 2.7 per cent. on 20 per cent. dividend ten times covered an UNION CASTLE at 27s. to yield 5.45 per cen,tI: on 'a 73 per cent. dividend 2.3 times covers Most investors would have preferred ,_1".,E latter for the sake of the higher yield, bus they would have been wrong. After merger terms were announced Clan L'Iltic rose by 27s. 6d. to 170s. and Union Os: 5 by 2s. 6d. to 30s. Clan Lines shireholelero, get 60 per cent. of the equity of the 'leo holding company and will exchange 0E116 eight-for-three basis. On the anticipated r per cent. dividend they will get double thel, present income. Union Castle shareholder! receive 6 per cent. preference shares on Itst one-for-five basis and ordinary shares on two-for-five basis and their income remala5
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practically the same. If I were a Unto" Castle shareholder I would be very 0.11,, noyed., It is 'always tiresome for an eclnItit holder to receive a fixed interest share I part exchange and although the merger en; hances and widens Union Castle prospe,c`o (through the Clan Lines interests) Itirl.te Castle equity was previously valued in ` e. market at very much below its assets vain I The exchange does it less than justice.suggest that Union Castle shareholder' should demand at the forthcoming meeting as much information about their real asse;t. as P. & 0. shareholders got from the',
directors after much agitation. ' '
SONS (HOLDINGS) IS. ordinary shares at ls. 6d. to yield 13.35 per cent. on, the 20 Ped cent. dividend which was covered one ne„, a half times. This company is the only OP1; in the textile industry which carries throng all the manufacturing and processing opere; tions involved in the production of coloured cotton fabrics for both furnishings an dresses. It has followed a poliiy of gettloo right down to the consumer through its 00 merchanting organisation. In that conne,c: tion it is interesting to read that it is bull, ing a £1 million cotton mill in Nigeria al semi-partnership with the Nigerian Govern' meet. Selling at ls. below their assets value' these shares cannot be considered dear.
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