COMMERCIAL Review Of Week’s Stock Exchange Transactions

Press, Volume C, Issue 29627, 25 September 1961, Page 16

COMMERCIAL Review Of Week’s Stock Exchange Transactions

The New Zealand sharemarket was quiet last week and price movements were neither as numerous nor as pronounced as in the previous week. Prices for both New Zealanddomiciled and overseas companies tended to rise.

New Zealand shares made 1.2 gains for every loss, compared with 1.7 gains the previous week. Australian and London-domiciled issues were leas buoyant than the previous week, when they made two gains for every loss.

After a quiet start on Monday, markets were active and very buoyant on Tuesday. Trading tailed off towards the end of the week, and Friday’s business was transacted in a confident manner.

A spate of company balance sheets—mostly for the year ended June or July—provided food for thought. Vibrapac (Otago), Burnett Holdings, Golden Bay Cement, Rotoito Timber and Maling and Company all reported higher profits in their most recent trading periods. .Whittome, Stevenson and George Court showed lower profits. South Otago Freezing reported a 58 per cent, fall in profit for the year ended August 31. Dividend was reduced from 10 per cent, (plus 5 per cent, jubilee bonus) to 8 per cent The previous year, profit had more than doubled, so that the latest result is still above the 1958-58 level.

Losses on lamb trading in the United Kingdom this year are probably mainly responsible for the sharp drop in this company’s profit. Competition from the new Alliance freezing works

at Lorneville may also have reduced the company’s throughput.

Loan And Agency Last week four loan and agency firms distributed their annual accounts, or reported preliminary results. Each of them reported lower profits: New Zealand Loan and Mercantile a drop of 23 per cent., New' Zealand Farmers’ Co-operative (Christchurch) 12 per cent., Canterbury Farmers' Co-operative (Timaru) 12j per cent., and Dalgety 9 per cent. Each of these companies is maintaining last year’s dividend rate, the C.F.C.A. dividend being paid on higher capital. There is obviously a common factor behind these results, although the two “co-ops.” are substantial merchants and retailers as well as stock and station agents. Directors of the New Zealand Farmers’ Cooperative report a reduction in earnings from grain and seed trading. This cannot be the sole explanation for this firm’s lower profit, as grain and seed trading must form only a small part of total turnover; higher profits from retail trading in the most buoyant trading period in New Zealand’s history should have compensated for much of the lower earnm-gs from gr? ! n and seed trading. The b’ggest common factor in all these businesses mus* be their activities as wool brokers. Both in Australia (where Loan and Mercantile and Dalgety are substantial brokers) and in New' Zealand, wool prices w’ere low-er in 1960-61 *han in the previous year. Brokers’ commissions were therefore reduced—and so w'as the spending power of their clients. Wi'fa a more favourable prospect for wool (though not for meat) *his season, woolbrokers’ earnings should improve in the cu-rent year. Publication of the Ix>an and Mercantile and Da’ge’v pre’iminary results should stifle criticism of the terms of the merger between these

two firms. Some early overseas and New Zealand comment on the terms implied! a criticism of the Loan and Mercantile directors for their recommendation of the offer. With some foreknowledge of the preliminary figures for both companies, however, they could scarcely have demanded a higher price for their shares. Other stock and station agents’ shares have attracted more attention since the announcement of the "Dal-! Merc” merger. Newton King (10s paid) shares have gained Is 6d to 15s in the last two weeks, and National Mortgage B have gained 9d to Bs. while New Zealand Farmers’ Cooperative are firmer on quotation. ' Woollens Rise Woollen manufacturers’ shares „ have been notably firm in recent weeks —five of them improved last week This trend reflects hopes of higher profits for these firms as import restrictions remove the competition for imported textiles. The trend is to some extent justified by the rise in 'wool prices, which places a premium on manufacturers’ present stocks. Forest Products shares continued to firm last week. At 37s they are 2s higher than two weeks ago, but still Is 6d below their 1961 oeak.

Otago Farmers’ Co-opera-tive shares, in first business for three mon’hs, rose 3s 6d to 9s 6d. Since previous business in these shares, the directors have withdrawn proposals designed to restrict trading in the shares, and to hold down their market value. The proposals were designed to strengthen the co-operative principles of the firm, by encouraging shareholders to deal with the firm. They were withdrawn after a protest from the Dunedin Stock Exchange. Similar proposals by the Hawke’s Bay Farmers’ Cooperative Association were met by a similar protest last week from the Wellington Stock Exchange. The opposition of interests in each case is the same: shareholdercustomers of the firm, on the one hand, and outside investors on the other hand. The chairman of the Wellington Stock Exchange issued a general warning to investors: "Unlisted shares, particularly those of a co-operative nature, should not be purchased unless very full inquiry has been made into the voting and other rights of shareholders.”

The Otago and Hawke’s Bay co-operatives have, apparently, encouraged (or at least permitted) “dry” shareholders in the past because they needed extra capital, but are now reluctant to divide equitably the profits accrued over years. The New Zealand Farmers’ Cooperative—to quote only one instance—does not give any discount to shareholders who patronise its retail departments; the co-operative principle has been discarded in favour of eouitable distribution of profits. English experience suggests that Marks and Spencer methods are

more successful than cooperative enterprise in a modern economy. Switch From Equities Apparently attracted into the market for Government stock by yields (on long-term stock) ranging around £5 3s 6d per cent, in the first week of September, more buyers have appeared in the last two weeks. Some of these may well have taken advantage of the recent firmness of the sharemarket to switch from equities into fixed-interest investments.

Government stock turnover was well down on the previous week's, but demand was well maintained Yields showed little change from the previous week's lower returns. Yields to maturity on stock traded in Christchurch were as follows: 3 per cent., 1960-63. £4 17s Id per cent, and £4 17s 4d per cent.; 4 3 i per cent., October, 1965. £4 19s 5d per cent.; 3 per cent., 1963-65, £4 13s 2d per cent and £4 13s 3d per cent.; 4 5-8 per cent., 1965-66. £5 Is 3d per cent. Details of transactions on the Christchurch Stock Exchange last week are as follows: Government stock, £3745 (compared with £10.060 in the previous week); local body and company debentures and stock, £13,300 (£2700); preference shares. 2350 ( 917); banks. 853 ( 309); breweries, 2600 (3300); building societies. 300 (nil); frozen meat. 1200 (1257); gas, 350 < 200); insurance, 1200 (1500); loan and .agency, 1715 (535); shipping, nil (1850': woollens and textiles, 3950 ( 2300); miscellaneous (Australian). 10.380 (15,460): miscellaneous (New Zealand). 11,991 (16.453); mining. 200 (1600); unlisted. 700 (298); total, 37,447 (45,979)