COMPANY NOTES
BY CUSTOS
THE sharp fall in oil shares which marked the end of the Stock Exchange account this week suggests that fresh bull positions had been taken up when the cease-fire cattle in Egypt and that these were being her' riedly liquidated on the still uncertain out" look. As I write BRITISH PETROLEUM are 130s. against a pre-Suez high of 180s. and the year's high of 183s. 6d., while miastAll on. are 81s. 3d. against 115s. and 117s. 6d. respectively. This gives a 4 per cent. yield, for BP and 4.4 per cent. for Burmah On. A short time ago such yields would have been considered handsome for these 'growth' shares, but until the political risks have been minimised I still think that the are not good enough. SHELL TRANSPORT' with its political risks widely distributed round the world, is down to 142s. to yield 3.65 per cent. CANADIAN EAGLE, with Its, production in the West and its tanker flee' certain to earn more, is naturally holding, firm at 64s. 6d., but its low yield of 3.; per cent. is not encouraging much fresh buying. Every market has been affected by the gloomy economic prospect. The et' edged market was not cheered by Mr. Macmillan's estimate of the modest cost of the short campaign or by the excellent over- seas trade returns for October. What lies ahead is worrying it, and it was depressing to be told by Mr. Macmillan that but for Suez he had intended soon to ease up. However, Mr. Macmillan's hint that the gold and dollar reserves had substantial reinforcements which could be brought into play was taken to refer to the drawings Which could be made on the International Monetary Fund of some $325 million. Unless the Suez situation worsens a temporary recovery in the stock markets seems overdue.
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The loyal shareholders of BRITISH MOTOR CORPORATION and STANDARD MOTOR will have uttered a sigh of relief that their respective reports were no worse. Indeed, that of BMC was better than most of us expected. Net profits fell by only 35 per cent. in spite of six months of short-time Working and a strike, rising costs, increas- ing competition and the cuts in the Australian trade. The dividend was main- tained at 124 per cent. and was covered more than twice. At 6s. 9d. to yield 9.4 Per cent. the 5s. shares may be bumping around the bottom if the encouraging reports of new orders at the motor show are followed up in sales. Standard Motor had a much worse year, net profits falling from £3.9 million to only £393,000. The change-over to a new model in the tractor factory, labour disputes, import restrictions overseas, the credit squeeze at home, all contributed to the disaster. The dividend Was cut from 12 per cent. to 8 per cent. and was short-earned. Yet the 5s. shares hold at 6s. 74-d. to yield only a little over 6 Per cent. because the 'special buyer' reputed to be MasseHarris-Ferguson) is NMI in the market. It would seem tempting for holders to get out on his back. If I were Making a fresh investment in the motor share market I confess I would single out l'ottp at 30s. (to yield 5 per cent. on a 74 Per cent. dividend covered 5.8 times) and ROLLS-ROYCE at 103s. (to yield 3.4 per cent. on 174 per cent. covered 3.4 times). The Position of these two companies seems assured.
The merger proposed between Mc- bOuGALL's and HOVIS is a very sensible one and should be supported by the share- holders. McDougall's are short of milling capacity: Hovis have a surplus. Mc- bougall's sell their self-raising flour and cake mix through grocers : Hovis sell their bread through bakers. The merger will date from January and it is expected that the new Company HOV1S-MCDOUGALL will be able to PaY 15 per cent. The merger involves an exchange of new shares of McDougall's for the old shares of Hovis—£11 worth for £10 ltock. At the present price of 45s. 6d. for McDougall's the potential yield is around el per cent., which is not unattractive for a stable 'consumption' share.
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Sir John Hay, unlike ,some people, knows when to retire in the face of opposition and has withdrawn his plan to use the surplus funds of his rubber companies to form an investment trust. The shares did 'not respond. Tea shares, like rubber shares, tend to be intrinsically undervalped on the Lon- don Stock Exchange (which does not like the political risks involved), but I am won- dering whether the continued advertising on 1TV of the 'quick-brew'eteas may not attract• some public interest to the tea share market. I have always warned investors about the unmarketability of tea shares (especially the Ceylon shares which are threatened by nationalisation), but I will mention one Indian company of great inherent strength. ASSAM FRONTIER last year paid 15 per cent. and earned over 50 per cent. and the average price it realised on its quality teas was 6s. lid. per lb. This year it has been getting a higher average price—in September over 9s. and in October around 8s. per lb. At 16s. the shares return a yield of about 184 per cent. on last year's dividend, which might well be increased. Moreover, no bonus has yet been declared.
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