COMPANY NOTES

By CUSTOS THE high level of activity on the Stack Exchange points to the lusti- ness of the new bull market. After a hectic Monday prices became

irreg lar except in oil shares which were helped

tty. Mr. Macmillan's climb-down over Suez. The

Oreliminary statements of BURMAH OIL and

• eANADIAN EAGLE had reinforced the bull position. Burmah Oil profits after tax were no less than 20 r cent. higher and the dividend was increased from 171 per cent. to 221 per cent.—rather more than the market anticipated. The company's Ifiirestment income from its holdings of BP and SHELL was 14 per cent, higher at £8 million, which

was under half the total trading profit of £16.6 million. This points to the increasing value of its Indian and Burmah business which the market had only recently been valuing at nil! I have often recommended Burmah in the past and do so again at 112s. 6d. to yield close on 4 per cent. A capital bonus cannot be too far distant. Canadian Eagle profits after tax also increased by 20 per cent, and the dividend was raised from Is. 9d. to 2s. per share, of which 35 per cent, is tax free (making the gross rate equivalent to about 2s. 6d.). A yield of 3.3 per cent. at 75s. 3d. for the registered shares denotes the market expectation of a share bonus, which is based on the retention of huge earnings in the subsidiaries. I must wait for the full report before trying to assess the value of this complicated share.

The industrial reports were mixed, as might be expected. DUNLOP RUBBER net profits were down byabout 30 per cent., but this masks the recovery shown in the last half of the year. (The first half was affected by inventory losses.) The final divi- dend is cut by 21 per cent. to 71 per cent., making

10 per cent. against 14 per cent. previously. The shares rose, however, to 19s. 100. (to yield 5 per cent.) on covering by bears. BABCOCK AND WILCOX profits fell by nearly 14 per cent. because costs have been rising more rapidly than sales, and the chairman, Mr. Lionel Fraser, tells the shareholders that 'we cannot expect better figures for the time being.' At 75s. the shares yield 3.95 per cent. It appears that the companies supplying nuclear power equipment are compelled to incur new investment expenditures which are un- remunerative for the short term. My impression. is that fashionable buying has driven up the shares of the nuclear power companies to too high a level for the present. By contrast HEAD WRIGHTSON which supplies capital goods to the nuclear power companies and other heavy in- dustries, increased its profits by 20 per cent. and its equity earnings from 70 per cent. to 90 per cent., the dividend being increased by 2+ per cent. to 221 per cent. I have previously recommended these shares which have now risen to 61 to yield under 31 per cent.

Paper shares still remain pretty depressed. Re- cently SP10ERS and WIGGINS TEAPE both reported lower earnings, although dividends were main- tained at 10 per cent. and 171 per cent, respec- tively, and last week A. E. REED showed a drop of nearly 20 per cent, in net profits (before tax) with the ratio of gross profit to turnover falling from 121 per cent. to 9.8 per cent. The dividend of 16 per cent, is as foreshadowed. The market will be keenly awaiting news from the chairman of the current year's showing, for, if this is more favourable, paper shares will be attractive pur- chases for recovery. I am informed that the paper trade in general is experiencing slightly better conditions this year, partly through the gradual decline in consumers' stocks, partly through an increase in profit margins which followed on the recent small rise in the price of most kinds of paper. Some of the companies are, however, fear- ful of the future effects of the European free trade zone, when that is established, for a sharp in- crease in competition from Scandinavia is bound to follow. That, however, would not worry Spicers, which is the largest importer of paper products in this country. Although it does produce a certain amount of high-grade paper and stationery, Spicers' main business lies in merchant- ing. E. S. AND A. ROBINSON iS also in a relatively strong position, being mainly a `converter,' making everything from paper bags and card- board boxes to cement sacks and specialised wrappers for tropical and arctic usages. It has also an important engineering business. Wiggins Teape has a big merchanting business but is also a large and efficient producer of high-grade papers for stationery, photographic and industrial purposes. A. E. Reed has certainly disappointed the market, which has a high opinion of its progressive management, but it has not yet had the full benefit of the £61 million of new money raised last year. Next to BOWATER it is the largest paper producer in the country (including a cer- tain amount of newsprint), but I would say that half its activities is confined to converting and packaging. Bowater needs no explanatory com- ment, but is too vast and complex for my liking.

Present Highest'

Price Price dend dead

1956

yield

Bowater .. 47/- 60/9 121% 5.3% A. E. Reed (A) .. 50/- 61/3 16 % 6.4% E. S. & A. Robinson 85/- 93/3 20 % 4.7%

Spicers . ..

24/- 40/9 10 % 8.3% Wiggins Teape

56/3

68/-

17.1% 6.2%

My general conclusion is that on any future fall in the market select paper shares might be bought.