COMPANY NOTES
By CUSTOS .
f:1;THE slow but steady imprefdement in the gilt-edged market has been
brought about by genuine institu-
:? tional buying, not by any interven- tion on the part of the Government broker. As I have argued before, a life insurance company with purely a money obligation on a non-profits policy should find it attractive to buy a Govern- ment stock like Electricity 3 per cent. 1968-73 at 723 with a true gross yield to redemption of nearly 7 per cent. (grossing up the capital gain at the 7s. 6d. tax rate applicable to insurance companies). The recovery in gilt-edged has for the moment been halted by the Middle East news, but it should go farther, while the equity share 'markets offer little temptation for bullishness. I was not surprised by the cut in the GENERAL ELECTRIC dividend. There has been plenty of warning from the AEI figures of declining profit margins in the electrical industry. In spite of a 10 per cent. increase in sales General Electric profits (before tax) were 6 per cent. down. Of course, the company has not yet had the full benefit of the new capital raised last September. At the present price of 49s. 9d. the shares yield 5 per cent, on the 123 per cent. dividend and on any further fall might attract some buying, but on the whole I prefer ENGLISH ELECTRIC, which has a prosperous aircraft side to its business and a fine electronics subsidiary in Marconi. At 63s. 6d. the shares yield 4.35 per cent. DUBILLIER CONDENSER, which makes the condensers and transistors for the electronics industry, has also reported a fall in profits of about 81 per cent. for the year to March, 1957. This company is distributing a one for two scrip bonus and at 7s. I think the Is. shares (to yield 4.3 per cent.) should be held for further capital appreciation. An unexciting report came from DISTILLERS, which increased its dividend modestly from 171 per cent. to 183 per cent. Its investment income from the chemical company (jointly owned with BP) was 12 per cent, up and total gross profits 83 per cent: up. This is obviously no fireworks display.
A misprint in my column last week informed the startled investor that the dollar premium had moved up to 741 per cent. It should, of course, have read 141 per cent. At the moment of writing it is 193 per cent. I find the professional managers , of investment trusts disinclined •to buy dollar stocks when the premium is much over 121 per cent., but there are some who are convinced that demand for the popular Canadian stocks in the now semi-static dollar pool will drive the premium to between 20 per cent. and 25 per cent. It may be useful for the investor to have a list of sound Canadian companies. The two leaders in oil are IMPERIAL (controlled by the Standard Oil of New
Jersey) and BRITISH AMERICAN (controlled by Gulf Oil). These are 'heavy' shares to buy and the yields are skinny-1.9 per cent. and 1.45 per cent. respectively. British American at $125 London (£25) is perhaps the more interesting as it owns the largest reserves of natural gas in Canada and will be the largest gas supplier. If a production speculation is wanted PACIFIC PETROLEUM is the share. It has the largest holdings in the Peace River gas fields of British Columbia and it has just made an important oil discovery west of this area. The shares have risen from $321 to $80 (London) this year and are now back to $751.
For the gas trunk pipe-lines the first choice has hitherto been WESTCOAST TRANSMISSION, whose 650-mile pipe-line will bring natural gas to the American border, its source of supply being sufficient to provide 1,000 million cubic feet of gas daily for twenty years. It will start pumping gas this autumn, supplying INLAND GAS and BC POWER. But the export of its gas to the Ameri- can market (through the EL PASO pipe-line) has now been threatened by the anti-trust suit against El Paso and by the news that INTERNATIONAL UTILITIES and PACIFIC GAS AND ELECTRIC propose to build a 1.300-mile gas pipe-line from Alberta to California in competition with the El Paso network. This would limit the long-term, growth of Westcoast Transmission, as 80 per cent, of its gas was to have been sold for export. Hence the sharp fall in the stock from over $100 to $91 (London)., At this price the stock is probably worth holding. TRANS-CANADA PIPE IS Still await- ing its gas export contract. This pipe-line will carry gas from BC and Alberta right across Canada to Toronto. Montreal and Ottawa. Its line will reach Winnipeg this autumn. When it gets to Montreal it will be earning on a through-put of 700 million cubic feet a day about $2.25 a share. At the present price of $82 (London) the stock seems high enough for the time. Among distributors I like BC Power, the main distributor for Westcoast : it is yielding only 2.3 per cent. at $114 (London). One must not forget Interna- tional Utilities in Alberta which has an expanding electric and gas market and should earn $5 a share by 1960. It has risen to $148 (London). Finally an oil development speculation which I am pleased to have suggested first as one of my New Year recomniendations. It was then CENTRAL LEDUC at $10 (London): it is now called CENTRAL DEL RIO at $31 (London)—and going higher.
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