THE WEEK REVIEWED.

Auckland Star, Volume LXIX, Issue 220, 17 September 1938, Page 8

THE WEEK REVIEWED.

ANXIOUS TIME,

INVESTORS WORRIED. MUCH ENFORCED SELLING I XTEMTATIONAIi FEARS.

Clouded over by daily news of the international crisis, the Stock Exchange lias experienced a trying week. All the worst features of the previous month have been accentuated. Business in London and chief European centres lias been n.inost at a standstill, with the exception of frantic efforts made by timid investors to turn their holdings into gold or into dollars in the hope that the funds will be sale in U.S.A. This has .brought about a substantial appreciation in the price of gold and a relative depreciation in sterling.

In . Australia unfavourable reactions ,V om ..tulon have been accompanied by •the disturbing effects of the coal strike ami an unfavourable trend iu the export markets. In this Dominion external influences are associated with political effects. Any respite that might have followed the closing of the Parliamentary session has been cancelled by the announcement that a general election is less" than a month away. This selection of an unusually early polling date is probably the only consoling feature available to brokers at the present time. It will be particularly difficult to do business in local securities amidst the turmoil of an election campaign and the. material limitation of the suspense period will be heartily welcomed.

Government Stocks Weaken. Of the limited business done during the week, a larger proportion titan usual Was transacted in Government bonds and stocks. Usually in a weak market investors fly to gilt-edij'od securities, values of wliicll appreciate accordingly. A reverse trend has been in ell'ect recently, and values have steadily moved downwards. Yesterday the long-term 4 per cents touched a new low-level sale at £100 2/0. With three months' interest £1 accrued this gives a return to the purchaser based upon redemption in 1952 of £4 1/0 per cent per annum. A year ago this issue was priced at £100. The present Government's 3% per cent issue, 1953-57, was on oiler all the week at £3 12/0 under par. Accrued interest amounts to 11/0, so that a purchaser to-day would secure approximately £4 1/ ,por cent per annum, assuming redemption in 1953. A year ago the scrip was priced at £99. Other Government issues were selling at relatively similar prices, and all appear to be excellent buying at current valuations. As in recent weeks, there was an exceptionally free offering of local body debentures, but buyers were scarce, and only one 6alc was .recorded, namely, of Mount Albert Borough Council bonds, ■which at £101 showed a yield to the purchaser of approximately 4 1-5 per cent per« annum. These calculations, it should be emphasised, do not allow for brokers' commission.

Banks and Insurances. There was little movement in banks. For the greater part o£ the week Australians were almost completely neglected, though n few buyers came in yesterday. As showing the weak trend, buyers of Commericals dropped back on Wednesday to 15/7, but holders stood firm, and when the market showed a slight recovery later in the week sales were made at 15/11 and 15/10. New Zealands also weakened in the middle of the week, with sales down to 41/0, but recovered later to. 42/, and Nationals were steady at the low level of 52/.

There was only one sale in the insurance section, namely, of New Zealand?, wliich at 55/ showed 11 drop of Od. This practically represented the only inquiry in the section. South British, Nationals nlul Standards were on offer most of the week, with 110 buyers in sight for-any of the three. Not for a considerable period has the demand for. insurance shares been so poor.

Martha's Dividend. A chief feature of the week in the mining section was the announcement published' in last night's "Star" that an interim dividend of 9d per share had been declared by the directors of the Martha Gold Mining Company. The market had been prepared by announcements made _at the annual meeting for a reduction in tho former dividend rate of 1/, and under the circumstances will probably be satisfied that the curtailment lias not been greater. At the annual meeting held in London the Js T ew Zealand director and attorney, Mr. H. G. Millfcan, told shareholders quite frankly that they must be prepared tor a diminution of profits, lie pointed out that the mine had been running for over 50 years. One of the most important factors was the rate at which ore could be got out. It might be possible to run for longer by cutting down tonnage, but there would be trouble r.s soon as this was done. Following these statements the shares have steadily dropped, and latest business was at 11/0, a price that seems to bo fully justified by the latest distribution and a remembrance of the company's substantial holding of gilt-edged securities.

Actual sales in the section were chiefly confined to outside linos, such as the Barrier Companies, Mount Morgans and l'iji issues. The Broken Hill shares fluctuated violently in sympathy with international changes. The only business in local enterprises was a sale of New Rivers and one of Sylvias, a Thames venture, at 7/6.

Australian Issues. All the Australian industrials suffered a severe check early in the week in consequence of external influences already referred to and showed a fair measure of recovery at the close of the week. Broken Hill Proprietary again supplied a typical instance. Commencing the week at 56/4 the shares slipped to 54/9 by Thursday, recovering yesterday to business at 50/3. Chain Stores also weakened, Woolworths (Sydney) selling from 20/8 to 10/9 and G. J. Coles' from 78/3 to 77/.

Dominion Securities Quiet. It was an exceptionally dull week for miscellaneous Dominion industrials, with only a score of sales recorded. Qns shares were neglected, Farmers' Trading eased slightly. Wilsons Cement were steady at the recently reduced level of 10/6 and Farmers' Fertilizers sold down to 17/. The only-line to improve its' position was Milne and Choyce's debenture stock, which sold 9d dearer at lfl/6.

Company Results. Company results announced during the Week have not been unfavourable. From Masterton came results of the Wairarapa Farmers' Co-operative Association's year. Net profits, after allowing for debenture interest, depreciation and building alterations, amount to £13,508, which enable the company to extinguish the balance of accumulated losses of past years, which totalled £7828.

A local manufacturing enterprise, Palmer, Collins and Whittaker, announce a record year, both in regard to turnover and profits. Dividend plus bonus on ordinary shares amount to 15 per cent for the year, compared with 12% per cent for the previous term. The old-established timber concern, Bartholomew Land and Timber Company, now in its 34th year, earned net profits £2606, compared with £2709 the previous year and the customary dividend 'of 5 per cent for the year is recommended. Latest Sales. Sales since last review have'been as follows:— ■ • llanltn.—Now Zealand; ■ £-2 '1/11 • (2)-, • £2 1/10, £2 1/0, £2 2/; National, £2 12/; Ommcttiiil,- .15/11, -15/10. • ■ Insurances.—New Zealand. £2 15/. Government; Bonds. 15/0/47, i p.c., £102. Stock: November, 3S-52, 3% p.c., £100 5/ (2), £100 (2); September, 30-43, 3Vs p.c., £100 2/6; May, 39-52, 3>,4

p.c.. £100 5/ (2), £100, 15/2/43-46, 4 p.c., £100 2/0, 15/4/40-49, 4 p.c., £101 (4), 15/0/52-55, 4 p.c., £100 2/6; Mount Albert 8.C., 1/7/41, £101. Mining.—New River, Gd; Wailii Investment, 8/7; Broken Hill South, £1 10/6, £1 9/3 (2), ex div. £1 8/8, £18/8; Lolomn, £1 4/10; Mount Kasi, 4/7; Mount Morgan, 10/11 (2); North Broken Hill, £2 5/6, £2 3/10; Rawang Tin, 8/ (4); Sylvia, 7/6. Australian, etc. —Alloy Steel (Aust.), 7/; Broken Hill Proprietary, £2 16/4, £2 16/3, £2 16/, £2 15/9, £2 15/3, £2 14/9, £2 15/, £2 16/3; Dunlop Perdriau. £1 0/!); Electrolytic Zinc, £2 2/0, £2 1/6, £2 1/, pref. £2 5/, £2 4/, £2 4/3; G. J. Coles, £3 18/3, £3 17/; Imperial Chemicals, pref, £1 1/8 (4); Tooths Breweries, £2 13/6; Woohvorths (Sydney), £1 0/8, £1 0/5 (2), £1 19/9; Woohvorths Properties. 14/. 14/1; WooUvortli (South Africa), 15/2, 15/. Dominion. —Auckland Gas (con.), 14/3; Consolidated Brick. 7/6; Dominion Breweries, £1 10/9; Farmers' Auctioneering (£5 paid), £4 8/9: Farmers' Fertilizer, 17/; Farmers' Trading, 19/9 (3), 19/8, A pref. £1 2/; Millie and Choycc (deb. slock), 16/6: National Timber. S/6; Northern Holler Mills, 19/; New Zealand Brewerics, £2 (3); Tarnnaki Oil, 12/0, 12/1;. Wilsons Cement, 16/6; Selfridges, X.Z., 5/0 (2).

RECOMMENDED. AUSTRALIAN IRON AND STEEL. The preference shares of Australian Iron and Steel Co., Ltd., are recommended aj a sound investment for the following reasons: The shares are available on the market to-day at approximately £1 7/0. They carry a cumulative preference dividend of Vh per cent., which is subject to the 20 per cent reduction provided by New South Wales legislation. It must be remembered, however, that the New South Wales Act docs not make this reduction permanent and unconditional, as is the case in New Zealand. If a company in New South Wales pays its ordinary shareholders a higher dividend than that available to preference shareholders, tlio distribution to the latter may bo raised accordingly. Thus, should the time como when ordinary shareholders receive 8 to 10 per cent, then the prefs. will receive their full Vk per cent. At next balancing, namely at November 30, there will be due four years' dividends worth 4/!), three years' being in arrears. Some time those arrears will he paid up. On that assumption, to-day's cost of £1 7/0 can be estimated at £1 2/9.

Oil the basis of to-day's - market price, 27/0, and dividend, the return on outlay is 4J per cent per annum. Allowing for the payment of arrears and present dividend, the return is 4% per cent per annum. Allowing for payment of arrears and a return to the full Vk per cent rate, the return would be increased to over (ill- per cent per annum. Dealing first with the question of security Australian Iron and steel, Ltd,., was formed in 1928 to acquire the undertakings of the well-known Hoskins Iron and Steel Company, Limited, together with the whole of the Australian business of D.orman, Long and Company, Ltd., except the Sydney Harbour Bridge contract. The headquarters of the company's operations were to be at Port Kembla, and its reserves of iron ore at Yamba, Cockatoo Island, West Australia and in Tasmania were stated at 45,000,000 tons.

In recent years the powerful kindred organisation, Broken Hill Proprietary, Limited, lias virtually taken control of Australian Iron and Steel, and now owns tlic whole of the ordinary shares, totalling £4,700,000. There are 1,000,000 £1 preference shares, and at last balancing these had a cover in net tangibles of £4 per share. When the position of its allies is taken into consideration, together with its own assets, totalling £8,000,000 the security sccnis absolute.

In regard to earning capacity, the nonpayment of dividends over several years can be explained by the fact that, the company has been almost constantly engaged in making substantial additions to plant, etc., to deal with a programme that lias been constantly enlarged in co-opera-tion in' recgnt years with Broken Hill Proprietary. Last year's, net profit, after setting aside over £200,000 for depreciation, £145,000, was the greatest since 1929, and with more plant at work it was generally considered that earnings would show a further increase during the current year. In that event preference shareholders can confidently look for a payment of the current year's dividend as well as. a portion of the arrears.

It may be taken for granted that the directors of Broken Hill Proprietary have satisfied themselves tjjat they will get a reasonable return for their heavy investment in the ordinary shares, yet the preference shareholders must inevitably come first.

Taking all tilings into consideration the prospects of these preference shares, invested in an Australian key industry, while providing a reasonable return on outlay, appear to have good prospects for increment in the near future.

TREND OF MARKET, /

The _ following table indicates the fluctuations in the values of various securities:—

Doc. 22. Sept. 9 Sept. 16. 1937. 1038. 1038.

£ s. <1. £ R. il. £ s. (1. A'nsln ... 10 15 0 10 10 0 *10 10 0 Commoroinl 017 0 0 1(1 0 015 11 E. S. mill A. 5 7 0 5 3 0 5 3 0 Nut., N.si. . 215 0 212 0 212 3 Nat.. Aus. .7 0 0 011 0 '« 11 0 N.S.W. .. 32 17 0 *30 10 0 »30 5 0 N. ZenlniHl 240 220 220 Union ... 9GG 8 8 0 *S 8 0

MISCELLANEOUS. £ e. d. £ s. d. £ s. ft. N.Z. Insur. 3 3 0 2 111 I) 215 0 S. British .*2 8 9 2 0 0 2 5 0 Golds. M. . 118 0 *1 7 0 1 7 0 Hrltlsll To. 210 0 2 7 0 2 5 0 Broken Hill 3 3 9 2 1(1 3 2 1(1 3 Elee. Zinc .270 2 2 0 |2 0 0 (prof.) 210 0 2 B 0 f2 3 0 Ans. Glass 412 0 412 0 412 0 Jit. Lycll 110 9 170 170 Col. Siwir 47 10 0 47 2 0 47 10 0 Anck. Gus 110 10 4 10 4 Wilsons C. 017 0 010 0 010 0 N.Z. Brew 200 2 03 119 0 Pom. Brew. 119 9 110 9 110 9 Farmers T. 1 0 0 019 10 019 8 GOVERNMENT STOCK. £ s. d. £ s. d. £ s. d. 1952-55 ltt! 10 0 101 0 0 100 2 0 1939-52 101 0 0 100 12 0 100 0 0 1953-57 08 C 0 94 5 0 94 .5 0 •Nominal. fEx. dlv. or Interest.