COMPANY AFFAIRS

Auckland Star, Volume LXX, Issue 23, 28 January 1939, Page 7

COMPANY AFFAIRS

AUSTRALIAN GLASS.

BONUS SHARE ISSUE.

MARKET VALUE OF STOCK. There is at present considerable speculation among investors about the bonus issue to shareholders by Australian Glass Manufacturers Co., Ltd., says the "Sydney Morning Herald."

The directors. In a circular to shareholders announcing the issue, stated that they were obtaining expert prefessional advice as to what plan would be best in the interests of the company and its shareholders. At present, they added, it was not possible to determine the extent of |ttie issue. There are, however, rumours circulating, the most widespread of which is that the bonus issue wHI be two shares for every one share now held.

The following is a statement of profits (after deducting the preference dividend) for the last five years, and it shows also the average increase in profits:— Increase on Profit less previous year, pref. div.. Amount Year, £ £ p.c. 1934 113.852 7,163 6.7 1935 159.7712 45.920 40.3 1936 189.743 29,971 18.8 1937 215,449 25,706 13.6 1938 271,878 56,429 26.2 Average increase in profits — — 21.1 If the average increase of 21.1 per cent in profits is maintained for the current year, the profit would be £329.244. Ordinary dividends distributed during the last five years were:— Ordinary dividend. Per Rate Amount cent, disTear. p.c. £ tributed 1934 9 83,743 73.3 1935 13 120,962 75.7 1936 15 139,572 73.6 1937 15 139,572 64.8 1838 15 139,572 31.3 The average yearly percentage of available profits paid as ordinary dividend was 67.8 per cent. Assuming that such percentage would be distributed in the future there would be available for 1939 a sum of I £223,227, sufficient to pay a dividend of 8 per cent on a reconstructed capital of 2,791,434 ordinary shares. For a stock such as Australian Glass it is reasonable to assume that investors would be satisfied with a yield of about 4 per oen|. Assuming that the bonus issue is two for one, and that the future rate is 8 per cent, the shaves would yield 4 per cent at a price of 40/. The net result would be that shareholders (on the basis of a bonus issue of two for one) would have three shares valued at 40/ each, equal to £6 for every ordinary share now held. If the bonus issue should be in any other proportion than two for one, the present estimated value of £6 for the present shares will remain unchanged because that value has been assessed on a yield basis. For example, if the issue should be one for one the estimated profit would be sufficient to pay a 12 per cent ordinary dividend, which would give the shares a value of 60/ each. Shareholders would thus have two new shares worth 60/ each for every share now held.

With a scheme of reconstruction such as that contemplated, however, investors quite rightly allow for various contingencies. Accordingly the present market price of £5 9/6 a share may be considered to be reasonably close to the estimated value which has been arrived at. Proposed Chuifo of Nam*. In a circular to shareholders the directors of Australian Glass Manufacturers Company, Ltd., state that the plans for the bonus share issue involve the registration of subsidiary companies. It is proposed that the name of the company should be changed to Australian Consolidated Industries, Ltd., to permit the registration of a subsidiary company with substantially the same name as that under which Australian Glass is now trading. An i extraordinary meeting of shareholders has! been called to authorise the change ofl name.