FINANCE AND INVESTMENT
By:CUSTOS
AFTER last week's shakeout, •which in some of the more volatile shares aniounted to a.minor slump, markets are again lifting their head. .At this stage it is too early to say that investors have adjusted their views sufficiently to resume buying with genuine confidence. It does seem, however, that there is enough evidence to suggest 1 strong likelihood that the worst of the recession is over. The drying. up of selling indicates that the over-bought positions have been cleared up and that the main army of investors have not revised their estimates of post-war prospects to the point which would cal for a further substantial downward adjustment of prices. On the contrary, the falls which did take place, ranging between 5 per cent. and 20 per cent, in the various speculative groups, have undoubtedly attracted a little buying on cautious and selective lines. Markets are, in fact, convalescent and already look well set for gradual recovery.
A.E.C. PUZZLE
Confidence in the blue chips of the industrial ordinary share market has been strengthened by the announcement of a 5 per cen tax-free bonus by the Associated Equipment Company. After main taming the distribution on the £1,500,000 of ordinary capital a 7f per cent., tax free, for seven years, the directors have now se fit to supplement this payment by a tax-free bonus of 5 per cent without offering any explanation other than is afforded by the profi figures. For the year to September 30th net profits are disclos as having risen sharply from £141,500 to £227,500, both figur having been struck after providing for taxation. -As the 5.-per cen tax-free bonus calls for £75,000, it is clear that this additional amoun has been covered by-' the increase in profits. What is not clear however, is the nature of the rise in profits, remenibering..that ih company, like so many others,- is operating against too per cen E.P.T. What the market and stockholders would like to 'know whether the figure of £227,500 has been influenced; 'by some. no recurring factor such as an adjustment of taxation charge. It seem a pity, in the circumstances, that the board has not seen fit to darn' the position in making its preliminary announcement, but apparentl stockholders will have to await the chairman's statement for a explanation.
Meantime Stock Exchange dealers have been understandabl diffident about quoting 'the Li units on any firm basis. While th price has been advanced from 65s. to 7os., the higher level is some what nominal. If the tax-free bonus can be regarded as iti th nature of a regular distribution, raising the rate to 124- per cen tax free, then the right price would surely be nearer £5 than If, on the other hand, the rise irk profits has been due to non recurring factors, the present quotation is not far wrong. In eitla event, this company's post-war outlook seems to be good.
BOWATER'S GROUP POSITION
True to their promise to make a start with cash payments on it preference capital, the directors of the Bowater's group of pap mills have now declared 21 years' dividends on the senior preferen issues. This still leaves another two years' dividends to be clear off on the preferences in question, as well as about four years' arrea on several important junior preferences. All the same, sharehold will welcome their board's decision as an encouraging indication the strength. of the group's liquid resources and of the trading oul look. So far as the latter is concerned, the recent increase of iit cent. in newsprint supplies suggests that in the current year t group should achieve a further recovery in earnings. Of the vario securities in thi7 Bowater's group the best value for money no seems to be Bowater's Paper Mills £i 7+ per cent, cumulative par ticipating preferences, carrying four years' arrears and quoted aro 23s. 6d. From an even longer-term speculative standpoint Edwa
Lloyd Investment £x 5 per cent. cumulative -preference shares a look attractive around 12s. 6d. In this case the resumption of di dends must await the titne when Edward Lloyd has cleared off own preference arrears and is able to make payments on its ordin stock, the investment company's income being entirely dependent revenue from the holding of Edward Lloyd ordinary.
• The tact that good.s made ot raw materials in short supply °until to war conditions. are advertised in this tournal should not be take* as an indication that thev are .netessarilv available for export.
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