In the picture
PORTFOLIO JOHN BULL
Associated British Picture looks to be a much underrated share. There are two reasons for this, both of which I think are misconceived. In the first place, AB Picture is a failed-bid situation. What happened earlier this year was that Electrical and Musical Industries bought 25 per cent of the company's equity from an American entertainment group, Warner Brothers. It wanted to use this holding as a platform for a bid for the whole equity; EMI was, however, baulked by the Independent Television Authority. The rrn was concerned by the fact that AB Picture has a half share in Thames Television. Quite simply, the ITA did not welcome the possibility that its own appli- cation procedures could be by-passed through acquisition of successful candidates, especially within months of the original decision. Thus although EMI offered to divest itself of its talent agencies, and gave assurances concerning film production and the conduct of the cinema chain, it was not allowed to proceed further.
So there EMI rests, having bought 25 per cent of the AB Picture equity at 47s 6d com- pared with a current price of 43s 9d. Now it is assumed that AB Picture is permanently beyond EMI'S reach—or anybody else's for that matter. My own information is not exactly in .accord with that line of argument. Emi con- tinues to lust after AB Picture and will bid again when the times are more propitious. In any case, EMI has already had some good offers for its existing holding which would leave it with a decent profit. Furthermore, the rrA itself cannot wish to play the role of defend- ing a company from a bid for ever. Secondly, AB Picture is not a popular share because of the undoubted fact that squashing its old television subsidiary, AB Television, into Thames in partnership with Rediffusion means a fall in profits from that source. My point
i here is that the decline in television profits s only temporary and that in any case the group has enough going right for it in other direc- tions—film distribution, studios and cinema developments—for group profits to be main- tained this year and to rise again next year.
Thus at their current price the shares are selling at 15.9 times earnings, which is far from expensive in today's markets. Dividend yield is a shade under 4 per cent. It is also worth noting that the group has two other com- modities of high value—cash and management. The last balance sheet showed liquid funds totalling £54 million. The chairman and chief executive, respectively Sir Philip Warter and Mr Robert Clark, make a powerful team. I have, therefore, bought 250 of the shares for my first portfolio. I would describe them as a holding for the medium term.
I have tendered my holding of Gallaher to American Tobacco, though I can hope for no more than acceptance of 52 per cent of my holding.
Valuations at 28 August 1968 First portfolio 100 Empire Stores at 71s ..
50 Phoenix Assurance at 177s 6d 225 Lyle Shipping at 22s 9d 100 Unilever at 76s 3d .. • • £2,000 War Loan at £47 300 Witan at 21s xr • • 250 E. Scragg at 26s 3d 50 Barclays Bank at 86s 200 Throgmorton Secured Growth (Capital) at 18s 104d
100 National and Grindlays Bank at
66s 3d xd . • 500 Clarkson (Engineers) at 15s
60 Rio Tinto Zinc at 157s 6d .. 1,000 Associated British Foods:at 12s 9d '1,000 Jamaica Public Service at 6s 14-d '250 Associated British Picture at 43s 6d Cash with local authority at 7i per cent
£6,526 Deduct: expenses £160 Total £6,366 Second portfolio total £5,401 (details next week) £355 £444 £2515 f381 £940 £315 £328 £215 £189 £331 £375 £472 £637 £306 f544 £438
Previous page
