FINANCE AND INVESTMENT
By CUSTOS
WHEN Sir Stafford Cripps starts thinking aloud, as he did at this week's bankers' dinner at the Mansion House, wise men stop to listen. One or two points emerge from his survey which are undoubtedly significant for the investor. It is clear, for example, that the Chancellor of the Exchequer is still pursuing his disinfla- tionary policy and that he has by no means abandoned hope of success. The Budget surplus may be below the estimate but apparently not by any wide margin. Again, Sir Stafford is deter- mined to cover a substantial outlay in capital investment by genuine savings and he would prefer that the saving should be done voluntarily rather than compulsorily through taxation. On the financial front, therefore, the Government's anti-inflation defences are still intact and it is only when forces are reviewed on the industrial front that the position appears less assured. Although wages are being pegged with fair success, the re-deployment of labour is lagging far behind official hopes. Since this is a voluntary process one can only assume that pressure will be strengthened through the various physical and financial controls available. The inference must be that it would be foolish to expect any quick or sustained recovery in the fortunes of the non-essential industries.
From the market standpoint Lord Catto's advice to the Chancellor of the Exchequer that the capital bonus duty should be repealed at the earliest opportunity can be interpreted as a hint that this unjust impost may be removed next April. I doubt, however, whether action along these lines will be allowed to create a loophole in dividend limitation. The time is not yet for equity investors to throw their hats in the air. Nor are their prospects of quick capital apprecia- tion improved by the launching of the new Doo,000,000 electricity loan. This formidable piece of financing is bound to absorb a good deal of the surplus money awaiting investment.
SHELL GROUP'S DOLLAR PLAN
These are the days of large-scale industrial as well as Government financing. Following quickly on the £28,000,000 expansion scheme financed in the London market at the end of last year the "Shell" oil group has now concluded new capital arrangements on an even larger scale in New York. The Shell Caribbean Petroleum Company, a wholly-owned subsidiary registered in New Jersey, is to raise no less than $25o,00o,000 on a 4 per cent. Bond issue. Allowing for the size of this operation and for the fact that the company is British controlled, 4 per cent, on a twenty-year loan is decidedly economical borrowing. What is more significant from the broader economic standpoint is that a vigorous development and expansion scheme for the group's oil production and refinery capacity in the countries of the Western Hemisphere is being financed with American dollars. The group's plans have been drawn up on a four to five-year basis and it seems a safe assumption that within this period there will be a substantial increase in production which will help to relieve the oil shortage as well as to yield a useful addition to dollar earnings. It is also in line with the principles of the Marshall Plan that British assets in the United States should not be disposed of under the pressure of the shortage of dollars but should be actively developed in furthering the general recovery aim. The effect on the London Stock Exchange has been to direct attention afresh to the merits of oil shares in general and to those of the Royal Dutch-Shell group in particular, whose potentialities have already been emphasised in these notes. At the current level of selling prices the oil industry is operating on a comfortable profit margin.
ROAD SHARE UNDER PAR
For investors who like shares standing below par with a chance pf a gradual improvement in market value the LI ordinaries of the Neuchatel Asphalte Company around 16s. 3d. look to me worth considering. This concern has important overseas interests in the road construction and contracting field as well as its well-established business here. Latterly, owing to restricted Government expenditure on roads, the English business has made little contribution to profits, but that has not prevented total revenue from increasing. Last year net profit rose from £35,055 to £84,237, and an ordinary dividend of 5 per cent. was paid out of earnings of over 18 per cent. The yield offered is therefore over 6 per cent. on a well-covered dividend with the prospect of higher payments as the fortunes of the English company recover and subject, of course, to dividend limitation. Details of plans for 'raising further capital to meet the needs of growing business are likely to be announced in the near future.
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