Floats Were Better Than Last Years

Press, Volume CVI, Issue 31234, 5 December 1966, Page 21

Floats Were Better Than Last Years

The public flotations by Associated British Cables and Salmond Holdings, just completed, were far better propositions from the investors’ point of view than the issues made by 1.C.1.N.Z., Prestige, and Tolley towards the end of last year. Largely because of the market decline in the last 12 months, the dividend yields from the latest issues strongly favoured the investor. For Associated Cables, the yield at 16s 6d was 6.67 per cent and for Salmond, floating at 20s, the yield was 6.25 per cent.

Compare this with the 4 per cent yield on the 10s shares issued by 1.C.1. at 20s! Even now, at 19s, these shares look overpriced for a forecast dividend of 8 per cent.

An advantage of the Associated Cables and Salmond issues was that neither involved a great number of shares. The issue by Associated Cables was 400,000 10s shares and that by Salmond was 67,000 10s shares. Even when offered at the slackest period of the market this year, these shares were quickly taken which emphasises that many are holding onto money for such bargains. Attractive Return The quick jump to 18s 7d of Associated Cables reflects the keenness of investors to buy into this stock which even at this price shows an attractive return of 5.9 per cent on the proposed dividend of 11 per cent. At the closing price of 21s, Salmond Holdings returns a similar yield of 5.9 per cent on a 12J per cent dividend. An added boost to these shares was that while they were floated at a low point in the market, they were listed at a time when the market gained buoyancy, helping the “stags” to take a quick profit. 1.C.1. 1.C.1., while traded frequently, has not made the gain in price that some thought might occur. The present yield seems to indicate that many expect a rise in dividend on that forecast. At 19s, a 9 per cent dividend would give a yield of 4.7 per cent, and a 10 per cent dividend, a yield of 5.3 per cent. The yield ended on September 30, and a statement on dividend and profit should be announced soon Prestige, since listing, has not found favour with investors, but at 10s 6d seems now a good buy. On the current dividend rate of 15 per cent this gives a return of 7.2 per cent. At the moment there is some apprehension over investing in woollen and tex-

tiles, and this has not been helped by setbacks by Kaiapoi, Petone, and McKendricks. However, Prestige has already announced a higher profit for the half-year to September 30, even though sales were lower. Last year’s profit of £125,419 covered the ordinary dividend of £69,000, 1.8 times. Profit in the current year, however, will have to rise to about £138,000 to give the same cover, as the £510,000 ordinary capital would require about £76,500 on a dividend of 15 per cent. Tolley floated at Ils 6d, and after rising to around 12s 6d slipped back to the issue price earlier this year. An increase in dividend from the forecast 6 to 7 per cent and an entry into a cable manufacturing venture have boosted the shares back to 12s 6d where they yield 5.6 percent.

All these issues, however, underline the advantage of taking up shares in flotations

of companies already trading, and already profitable. There’s ■ not the indefinite delay wait-i ing for the company to become profitable—if it can. The disadvantage of often paying a premium for the shares is outweighed by the immediate advantage in receiving a dividend and the knowledge that the company can trade profitably. Which leads to the question of the New Zealand Steel float. No announcement has been made on how well the £6.5 million in capital is being subscribed to by the public.

Directors have said that they will make no announcement until the issue closes on December 9, or earlier, although they did say that initially thousands of applications had been received. In Christchurch the response appears to have been erratic. Some sharebrokers have received a good response but others, apart from the initial rush, have since had little inquiry. One guess early last week was that the issue was more than half full, but little definite can be known until a statement from directors.