BLYING UNION-CASTLE ORDINARIES The outlook for shipping is so good
that I hesitate to advise readers to take profits either on Furness Withy, now 3os., or British Oil Shipping, which have risen from 9s. 6d. to 12s. 3d. since they were recommended in these notes. Freight rates are holding up remarkably well at the higher levels estab- lished a few months ago, and there is no obvious reason, in view of the steadily increasing demand for tonnage, why shipowners should not enjoy a fairly long spell of prosperity. Costs are, of course, increasing, and most companies need to spend money on improving their fleets as well as to replenish their depleted reserves, but there should still be something over out of which to pay substantially larger dividends this year.
One of the events in the shipping market which I suspect will create quite a stir in the autumn will be the beginning of Stock Exchange dealings in the ordinary £r shares of the Union-Castle Steamship Company. This company's ordinary capital is held in virtually equal proportions by the E.D. and the R.M. Realisation Companies, and in both cases the Union- Castle holding is now the most important asset still awaiting disposal. The method to be adopted is the distribution of the Union-Castle shares pro rata to the shareholders of the two realisation companies, so that anyone who buys the realisa-
don companies' shares is, in effect, buying Union-Castle ordinaries. The more economical route is via E. D. Realisation, now quoted at 54s. 9d. Allowing for the disposal of this company's other assets on a conservative basis, I estimate that a purchaser at 54s. 9d. is, in effect, giving less than 3os. each for his allotment of Union-Castle £r ordinaries. Will they be worth more or less than this ? In my view, considerably more. In recent years Union-Castle has immensely strengthened its financial position, and in 1936 earned over 14 per cent. on its ordinary capital. This year, in view of South Africa's growing prosperity and higher freights, earnings should improve further, and I see no reason why the shares should not cross the kz mark early next year. Meantime, E.D. Realisation shares are an attractive purchase as a stepping-stone to the Union- Castle ordinaries.
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