Market watchers select their shares for 1980

Press, 16 February 1980, Page 19

Market watchers select their shares for 1980

Bv

ADRIAN BROKKING.

commercial editor

This is the fourth in a series of articles which review the selections by 11 market observers of the shares to watch for 1980. The first two articles appeared on Thursday and Friday last week, and with the selections of the sharebrokers Hamilton Hindin and Greene, Egden Wignale, and Renouf and Company. The third article was published on Wednesday, and reviewed the recommendations of Lawren c e , Millton and Howarth, and of Jordan, Sandman, Smythe and Company.

Chamberlain. McKie and; French, members of the Christchurch Invercargill Stock Exchange, say in their• February newsletter: “The limelight stock on the New! Zealand market today must: be the issue of the A.N.Z. Banking Group (New Zealand), Ltd. Allflex, the hold-; ing company of Delta Plas-I tics, Ltd. is also currently! making an issue. Both issues] will be heavily over-sub-: scribed, and those fortunate, enough to receive allotments! will gain some premium! benefit. “This could well be an opportune time for investors] to review the market as a i whole. Some feel that the over-all rise has happened too quickly — the Reserve Bank index currently is 1576 (last year 1373). Consideration must be taken into account of the inflation we are at present experiencing when comparing indices. “Many investors have now had second thoughts about fixed interest investments. While the high rates of interest which have previously and are still being offered, initially appear attractive, after consideration of tax rates and the depreciated value of the NZ$ on maturity, this type of investment can only be satisfactory in the very short term. The one exception 1 is the Inflation Adjusted Bonds — for those who are nearing, or are over sixty. The tax free premium on this investment for the senior citizen is most attractive, with the deposit being available at one month’s call. “Although we are suffering harder times than we have experienced in the past, and these will continue at least this year, we must still have a sound future ahead of us. With abundant supplies of food and wool! and our- energy problems] beginning to be resolved; there are still selective op-1 portunities for the investor in the equity market. I Chamberlain, McKie and French think the following shares worthy of consideration: N.Z. Forest at 271 c, N.Z. Steel at 182 c, Fletchers at 283 c. Challenge al 220 c, L. D. Nathan at 198 c, N.Z. Industrial Gases at 370 c, D.I.C. at 150 c, Allied Farmers at 240 c, Progressive at 380 c. Alex Harvey at 235 c, South British at 301 c, D. McL, Wallace at 130 c. Feltex at 117 c, L.W.R. at 76c, T.N.L. at 75c, and Freightways at 118 c. “The first four stocks , shown are some of New ' Zealand’s best ‘heavyweights’ and should form a basis of any share portfolio. Their past, records have re- ' vealed certain ups and downs, but they must be regarded as consistent performers for the future. N.Z. Forests have reported a , much better half year to September, 1979. Fletchers , and Challenge are large well j diversified companies which will be turning some of their I interests to energy devel- ( opmerjt. ]

. “We have recommended the other companies'for the! following reasons:— ■ L. D. Nathan —“With the merging of the resources of] iWoolworths and McKenzies! ’into this company it now] becomes one of New Zea-i land’s largest merchandising; and retail organisations. Fut-I ure results must be favourable.” N.Z. Industrial Gases and] D. McL. Wallace — “Must; .participate in a substantial; fpart of the energy pro-!

gramme in the future.” Allied Farmers — “Have an excellent record as a stock and station agent. They are well diversified and service areas rich, in farming and with plenty of potential for development. They have just reported a substantial increase in their half-yearly profit, of 66 per cent.” Progressive Enterprises — “Has had an excellent record and should continue to perform well. Last year th.eir turnover exceeded <sloo milllion and the pre-tax profit on this was 4.5 per cent. (In 11975 their tu;— -cr was $43 1 million and pre-tax profit was 3.4 per cent.) Their F o o d t o w n supermarkets I have withstood serious competition from outside sources.” Alex Harvey Industries — “Is a well diversified company and although closely allied, to the building industry it has performed well. ■ Their activities with ‘Pink Batts’ and re-roofing alone have kept them before the public eye. Glass and’ plastics are also main parts of their turnover which last year exceeded $243. million, of which export sales represented a figure in excess of $3l million.” South British Insurance — “Their dividend payment of 261 per cent augurs well for a bonus issue. With an investment income last year in excess of $l5 million (up 14 per cent on the previous year) their dividend of .$6.2 million is covered almost three times.” Feltex — “Has been a steady performer apart from the 1978 financial year when their profit took a downturn. This company is well diversified and has paid, and will be able to pay, tax-free dividends for another four years at least.” Lane Walker Rudkin — “We consider this stock to be underpriced. No doubt the fear of cheap imported clothing has made the investor wary of this local company. Despite the 1979 financial year resulting in a drop in profit the directors increased the dividend payout which confirms a certain confidence in the future. The dividend return to shareholders is attractive.”

D.I.C. — “This company’s results have been disappointing over recent years

I.and therefore we cannot; :jrecommend them on their! performance, but with an 1 ■ asset backing of $3.89 they, “must be a take-over pros-: Ipect.” * i T.N.L. and Freightways —L ■■“ Have been included because' :of their important ' position jin the commercial world! !today. T.N.L., while showing] ■ an extremely good dividend] I return, have been dis-1 .1 appointing from an in-’, jvestor’s viewpoint. We feel ■ that their shares are underpriced. Their last quarterly report forecasts a “bright; future.” Freightways is undoubtedly a leader in their field at present. Their yield on earnings and on shareholders’ funds reveal attrac- 1 tive investment prospects. ; Although fuel prices will continue to rise it is sufficient to say transport is an j essential part of our way of ‘ life, and such essential industries must continue to flourish.” ! J. S. and S. M. Satterth- . waite, the Timaru share- 1 brokers and members of the ‘ Christchurch Invercargill Stock Exchange, recommend the ’following nine companies as a good investment ‘ for 1980:— C.F.C.A. — “The company’s continued development of its fishing interests, together with the North ' Otago Farmers take-over, should pay a handsome dividend in its centennial year of 1980. The shares have been neglected in recent years and now look undervalued in relation to the ; company’s future potential.” Par 100 c; price 195 c. Fletcher Holdings — “Well diversified and strong in exports, the company should continue to show , good growth during the 80s — its ‘.ax free di.-idends are an added attraction.” Par 100 c; price 285 c. Goodman Group — “The company displayed an entrepreneurial stance during the latter part of the 70s and was well rewarded. It seems likely that this pattern will continue — shareholders will continue to benefit.” Par 100 c: price 225 c. Montana Wine . — “A good wine will always attract custom, and Montana has just that. The demand for wine, particularly white wine, shows no sign of falling off — Montana is well placed to meet this demand — increased profits and dividends will follow.” Par 50c; price 144 c. Radio Avon 8' “An increase in advertising rates for the second half of the current financial year should produce another record result. The company has a small capital with high earning potential — further capital benefits must follow.” Par 25c; price 175 c. B.H.P. — ‘Australia’. No. 1 Stock — widely diversified — heavy involvement in oil, steel, and mining. The 80s hold great promise for the company. By world standards the shares appear well undervalued.” Par 200 c, price (Aust) 1300 c. Woodside Petroleum 8

; ”The company has possibly i the largest natural gas ■deposits in the free world. As the company continues Ito explore the North West ’shelf area more discoveries ’can be expected. A good 'energy stock for the 80s.” Part 50c; price (Aust.) 245 c. ■ Western Mining Corporation — “One of Australia's imost successful mining comIpanies in terms of exploration. Roxby Downs looks to be a winner. The company has a solid involvement in gold.” Par 50c: price (Aust.) ] 480 c. I MM.I.M. Holdings — “The rich Mt Isa mine continues, to produce high quality cop-per-silver-lead and zinc. The present high metal prices will produce a record profit for the company for the presen-t financial year.” Par 50c; price (Aust.) 600 c. Satterthwaites attach a note to their recommendations of Australian shares.' which points out that New Zealanders may purchase Australian shares through the approved Reserve Bank pool scheme. The present premium is about 24 per cent, they say. i