THE WEEK REVIEWED.

Auckland Star, Volume LXX, Issue 35, 11 February 1939, Page 4

THE WEEK REVIEWED.

AN ACTIVE DEMAND.

INQUIRIES WELL SPREAD.

| MW 1 v#w 1-mto m«ni\LU UUVVN. ! GOVERNMENT STOCKS STILL WANTED. i Business 011 'Change showed very little improvement, so far as volume was concerned. during the week which ended last night, and the majority of the 30 odd brokers who attend the calls regularly I were doubtless disappointed with their share of the moderate number of sales put through. jet there was a very fair inquiry. At yesterday s 110011 call there were buyers for no less than 160 different securities, j varying from Government stocks through ; various classifications down to mining scrip of small value. It is all a matter |of price, and this in s turn is measured I by the investor according to the security jof the scrip and its probable earning ] power. At the moment Dominion securities are being marked down severely by buyers because they are doubtful as to the ability of trading companies to pay the heavier charges imposed by legislative enactments and at the same time retain sufficient of their earnings to pay customary dividends. As a natural reaction. Government stocks —which had been allowed to fall too low in the latter half of the last year—have presented a welcome refuge to the person with surplus funds. Preference is also being given to Australian industrials by those who are timid as to the consequences of the New Zealand Government's policy, but operations in these is restricted by the difficulties put in the way of the transfer of funds. Despite recent advances, Government stocks should still be safe buying at about their present price as they all show a return to the present investor of more than 4 per cent on his outlay. Thus the 43/46 4 per cents which sold yesterday at par showed a rise of 33/ since Christmas. However, a half-year's interest is payable nest week, so that, based on redemption in 1043, the purchaser will actually receive over 4Vfc per cent per annum on his outlay. A sale of the present Government s issue, 1033-57 3V> per cents was at £91 10/, showing a return if redeemed at the earlier date of approximately 4% per cent per annum. However, sellers were very scarce, and buyers who could not obtain their requirements in Governmcn issues showed greater inclination to accept local bodies as substitutes. Auckland Harbour Board debentures were in daily request, but these are almost as hard to find as Government bonds. However, a number of sales were made in this class, including Auckland Transport, Mount Albert, Newmarket Borough Council and One Tree Hill. Bank of New Zealand Improve. In the banking section chief interest centred in New Zealands, which sold freely at last week's reduced price of 38/0, after which the market firmed and final business was at 38/10. Nationals were weak, being on offer at 47/, with 110 buyer in sight. In London they are priced still lower, namely, at 29/, which, with exchange added, is practically equivalent to 36/ in our currency. The Government's embargo 011 exchange has robbed the London market of support from New Zealand operators and enterprises located in New Zealand are not popular with London iuvestors at the present time. Insurances Steady. There was a consistent demand for nsurauce sliares practically at late rates. Sew Zealands paid the 1/ interim dividend ind then sold 1/3 lower at 53/9, while South British were transferred at 44/6 to 14/7 Mi. Australian Securities. There was an improved tone in leading i Australian industrials, but business was ' estricted to a mere handful of the recog- ' lised leaders. These commanded higher 1 irices. Colonial Sugars at £48 3/ were 0/ up and British Tobaccos, with sale I it 49/ and a final market between 49/ 1 md 50/, showed an 18d advance. Special < nterest centred in Woolworths (Sydney), i vhich rose steadily from 23/ to 24/3. ' ( Mining Shares.

Business in the mining section was chiefly confined to Mount Morgans, which sold freely 011 a rising market from 11/ to 11/11. The only sale amongst Dominion dredging enterprise was of Grey Rivers, which at 17/7 showed a drop of 3d. Grand Junction Closing. An interesting announcement during the week came in the form of a cabie from London to the effect that the directors of the Waihi Grand Junction Mine proposed the liquidation of that company. ! It wa6 in 1926 that the directors, having ; found it necessary to write down share ! capital from 20/ to 2/ a share, came to . an arrangement with the big Waihi comI pany for joint working of its area. It is ! a fine tribute to the wisdom of this move and to the excellence of subsequent 1 management that regular dividends have since been paid, and now, when liquidation at last becomes necessary, the shares are priced on the market at 3/4. In this connection it is interesting to recall that in a review of the company published in these columns 18 months ago the margin of assets over liabilities was assessed at 3/3 per share-. Tt seems likely that purchasers at the present price will make a profit on their investment as the assets appear to have been conservatively valued, and there should be some gain in the property account, which was written down a couple of years back to £1. * Dominion Issues. Despite the prejudice which still persists in regard to Dominion industrials and other miscellaneous securities that are affected by Government legislation, there were signs of improvement in some issues and business embraced a wider area than it did the previous week. A slight recovery was made by Wilsons Cements, with business at 15/10. and in Farmers' Trading at 18/10, while Consolidated Bricks made further progress, with sales from 8/6 to 9/. the highest figure realised for some months. Reid Rubber, too, gained 1./. with a sale at 23/. while buyers' offers for Kaiapoi Woollens were advanced from 10/ to 11/6 without leading to business. The process of revaluation of New Zealand industrials that has been going on in recent months was instanced in the case of Bycrofts' shares, which were ii» regular demand a few months back at over £2. These sold at 36/6. Another industrial illustrating the prevalent trend is Sharland and Company, a thoroughly sound concern, which paid dividends regularly right through the last slump. In the last five years the rate hae been 5 per cent per annum on both ordinary and preference shares. The ordinary shares changed hands on Tuesday at li/iVi, a drop of over 3/ since last August.

TREND OF MARKET. Tlie following tabic indicates the fluctuations in the values of various securities:— Jan. 27. Feb. 3. Feb. 10. 103 S. 10311 1930. £ s. d. £ s. d. , £ s. d. A'asia ... !) 15 0 *9 15 0 *9 30 0 Commercial 0 l(i 0 0 16 0 f0 15 9 K., S. & A. 5 - ti 5 1i 6 5 — 6 Nat., N.Z. . 2 6 3 a 0 8 2 6 3 .Nat., Aust. 6 15 0 (J 15 o ti 15 0 N.SAV. .. 30 12 ti 30 1.1 0 30 15 0 X. Zealand 1 IS ti 1 18 ti 1 lft O Union S 12 G S 7 6 S 5 0 MISCELLANEOUS. £ s. (I. £ s. tl. C s. (1. N.Z. Insur. 214 9 215 0 |2 13 9 S. British .2 3 5 2 4 6 2 4 6 (iolils, M. .*1 !» O »1 7 (i *1 7 6 Brir. Tub. 2 S ti 2 8 6 2 ft 6 Broken Hill 2 Hi ft 2 17 <> 2 IS 0 Elce. Zinc 2 5 (i 2 6 6 2 7 0 (pref. I 2 It 6 2 10 O 2 10 0 A list. Glass 5 10 It 5 10 O 5 It 0 Mr. I .yell . 1 ti 0 170 170 Cul. Snwir 47 5 0 47 15 ft 48 5 0 A ink. (ias . tl 1!) O O IS 6 fo 17 10 Wilsons" 0 lti (I 0 15 ti 0 15 lt» N.Z. Brew. 2 10 2 O 8 1 10 ft limn. Brew. 1 12 o 1 12 O 111 ft Farmers' T. O IS 4 0 IS 4 0 18 10 c;OVERNM ENT STOCK. £ s. tl. i! s. d. £ s. d. 1052-55 . lift 0 O 00 10 0 00 10 0 1034-46 . 00 10 (I 00 HI O 1110 I) II 1053-57 . 01 111 0 01 10 o 01 10 O •Nominal. fEx dividend. RECOMMENDED. FARMERS' TRADING SHARES. SELLING BELOW PAR. Ihe ordinary shares of the Farmers' 1 lading Company are recommended as a sound investment for the reason that they call be bought to-day at 19/, so that the yield to the purchaser based upon the customary dividend of 7 per cent is very nearly 7'Js per ccnt per annum on his outlay.

Taking fiivt the question of security. The company, which conducts the leading mail order business in the Dominion, has a paid capital ol' £753.2U0, and at last balancing, namely, March 01, 1938. its assets totalled £1.310.723. After making provision for all known liabilities its well as tor possible depreciation in various forms, the surplus of a sects over outside liabilities represented £1 5, 6 per ordinary share. Substantial Reserves. The most vulnerable feature in this business, which deals extensively in credit transactions, is the amount owing by sundry debtors. Many businesses have been ruined by lack of attention to this important feature. The "Farmers,' " however, have dealt with the item so carelully that it should provide no anxiety either for the management or the shareholders. At balancing time amounts

owing by sundry debtors stood at £383,417, but against this was placed a reserve of £106.422, so that it showed on the books as £270.895. In ordinary business practice provision for bad debts is usuallv considered adequate at from 2M to 5 per cent, so that the ''Farmers' " provision of over 27 per cent should provide for all conceivable contingencies.

I Another important aspect of all trading balance-sheets is the position of stocks. At last annual meeting, the chairman of directois, Mr. A. A. Ross, stated that the company turns it<? stock over six times in the year. Obviously there can be little on hand in the nature of stale or out-of-date lines, but here again a conservative view has been taken, and against a total of £345,479 a reserve of £50,000 has been set aside to provide foi» market fluctuations. Depreciation that appears to be adequate is written off yearly from the fixed assets. In this connection it should be noted that the company's properties, valued at £497,258. are free from all outside liability, with the exception of a small mortgage of £10,000. In other words, the "Farmers' " have the freehold of their own home.

The liquid position is thoroughly satisfactory. At the annual meeting the chairman stated that the days of bank overdrafts in the company's finance had passed, and his remarks appeared to be justified, for on balancing date the amount of cash on hand and money at call totalled £173,000. The facts related above appear to indicate that the security of the shareholders' funds is amply safeguarded. Enterprise Brings Profits. Hie earning capacity of the company has been fully demonstrated in the accounts issued over the last decade. Last year gross profits totalled £422.669, and net earnings reached a new high record of £115,310. To pay the usual rates of dividend required just under £50,000, leaving ample funds in hand after providing for income tax.

Immediate prospects appear satisfactory. The policy of the management is marked by enterprise and courage, and the directors do not hesitate to face heavy expenditure when fresh developments and extensions seemed to warrant it. Quite recently the first trolley -buses in Auckland made their appearance as part of the company's free transport scheme. Extensive additions were made to the building and plant a year ago. and more recently further big additions have been made to its huge parking area, -maintained and supervised for the benefit of its patrons. These improvements have involved a big outlay, but this has been more than offset by constantly increasing turnover, which a year ago exceeded £2,000,000 annually.