INVESTMENT NOTES
By CUSTOS •
LAsr week our bill rate edged up to .£3 I 5s. 8d. per cent.. while the American is about 4i per cent. City eyes are anxiously watching the next move of the American banks. The Federal Reserve rediscount rate is 4 per cent. and the commercial banks' prime lending rate 5 per cent. if either rises it will be serious for London. The position would be eased if Congress lifted the 4i per cent. ceiling on government issues with a life over five years, but latest reports afford little hope that this will be done. I mention these technical points because the equity markets on the Stock Exchange will fall further if Bank rate is raised and probably continue to drift even if it stays `put.' There are precious few shares at prices likely to attract buyers. For example, the lift in the WOOLWORTH dividend from 40 per cent, to 45 per . cent. was not sufficient to bring new support for the market. The shares, like most others, were already discounting the more favourable results. We did not need Panorama to tell us that.
Television Shares
The 45 per cent. drop in the trading profits of ASSOCIATED BRITISH PICTURE for the half-year to September was a great shock to the market, but some recovery has rightly been Seen. The direc- tors' statement inferred that the current half-year's profits would be higher, cinema attendances not being badly affected by the weather. If the pre- vious year's earnings of 155 per cent. are reduced to, say, between 85 pet' cent, and 90 per cent., it would be possible to maintain the distribution at 60 per cent. The shares at 46s. would yield 6.5 per cent, on that basis. The market was, however, dis- turbed by the, statement that the television sub- sidiary's profits were adversely affected by the expansion and reorganisation of production facili- ties and by, the increased cost of producing pro- grammes. This is surely to be expected. The tele- vision companies, looking forward to the renewal of their contracts, are bound to stress their increasing costs. The investor should be prepared to see profits decline from their outrageous peaks; but no one should imagine that television pro- gramme contracting will not remain an extremely profitable business. I still favour ASSOCIATED TELEVISION, the company providing London Weekend programmes and the Midlands from Monday to Friday, which is very shrewdly managed by a combination of tough theatre tycoons and Mr. Norman Collins. In view of their distribution Of risks-with interests in television outside this country, not to mention British Relay Wireless and Pye Records-Associated Televi- sion 'A' shares should be worth holding. They are quoted at present at 78s: to yield 6.4 per cent. on the 100 per rent. dividend, and will be going ex the 180 per cent. bonus shortly. In their new form they should attract a wider market.
Educatiosal Shares •
It is a far cry from popular commercial televi- sion 10 the EDUCATIONAL SUPPLY ASSOCIATION
which manufactures school stationery and text- books and classroom equipment and furniture. including equipment for laboratories, hospitals, canteens and cafés. The steady increase in schools has kept the company with a full order book, and it is also exporting its products to East and West Africa. The company also conducts a popular trade in 'do-it-yourself kits and in fitments for pleasure boats through its subsidiary `Kitboats.' The net profits have shown a good rising trend in the last four years, and in the year to May, 1959, the com- pany earned 32 per cent. and paid 124 per cent. The last capital bonus was given in March, 1959, namely 25 per cent., and in September last there was a rights issue to help finance the acquisition of Kingfisher Ltd., a furniture company with good contracts with the educational authorities. At the present price of 54s. the £1 shares return a cur- rent yield of 4.6 per cent. and an earnings yield of nearly 12 per cent.
Bank Shares: A Correction • On January 15 there was a misprint regarding the amount of profits derived from hire purchase by the Royal Bank of Scotland. The correct figure is 10 per tent., not 70 per cent. A correspondent also points out that the corresponding; percentage for the National Commercial Bank of Scotland should be nearer 35 per cent, than 26 per cent.
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