Market watchers’ 1980 selections

Press, 20 February 1980, Page 25

Market watchers’ 1980 selections

Sturge, Wilson, and O’Malley, members of the Christchurch Invercargill Stock Exchange, say in their December market letter that if faith is the foundation of business development, expectation gives it nurture. “In spite of all the problems that challenge New Zealand and the sobering influence of persistently rising interest rates, the eighties will be greeted by company half-year and annual results that “ frequently set records and in some instances, represented gains as high as 95 per cent (Henderson and Pollard) compared with a year earlier. Some of the credit, or blame, goes to inflation, of course, and what the ‘real’ profits are is a subject for debate,” they say. “But concede all that, and taking the long view, the Dominion enters the new decade with every reason for confidence. The Government seems to be settling on an energy policy that will not only bring prosperity to Taranaki, but within a couple of years benefit both islands through the bulk distribution of liquefied petroleum gas. Southland appears poised for a multi-million-dollar silicon carbide industry, and both Otago and Westland stand to benefit

from the sustained come-back by gold. Wool is back among the peaks, the demand for meat holds good, New Zealand Forest Products, spectacular profit gain of almost $12.5 million to almost $lB million for the September half wasn’t accidental, nor was Tasman’s trading profit of almost $9 million against a loss of more than $6.3 million.

“The auguries are distinctly good — not withstanding the Middle East crisis and unleashed inflation in most world markets. In short, there’s more going for us than against us provided we . think big and plan prudently.

“In line with some excellent company reports, Fletcher Holdings, on unaudited results, announced that net profit to September 30 rose 103.6 per cent to $11,050,000, from $5,426,000.

N.Z. Forest Products — “No portfolio would be complete without a holding in ‘N.Z. Forests.’ The company showed a massive increase in net profit for the six months ended September 30, of $17.9M as against $20.3M for the whole of last year. At the present price of 275 the shares give a yield of 5.6 per cent. The interim dividend is being increased 1.5 per cent to 8.5 c a share

so that directors expect to be able to recommend a higher final dividend. Waitaki N.Z. Refrigerating — “Waitaki is the large freezing company comprising the amalgamation of Waitaki and N.Z. Refrigerating Company Limited. With the buoyant export market at present the company’s results for the year ended October 1, 1979 should be buoyant. The six months net profit to April 1, 1979 showed a net tax profit of $8,025,935 as against $7,548,179. With a dividend of 13.5 per cent this gives a yield of 8.9 per cent on present price of 151.” This letter was written in December; since then the company announced a 40 per cent profit increase to almost SI2M, and the dividend was increased to 15 per cent (11 per cent tax-free). Carter Holt Holdings — “Carter Holt is a holding company with interests in saw milling, pulp and paper manufacturing, joinery, builders supplies, etc., etc. They have a wide diversity of interest today particularly a considerable holding in Sealord Developments Limited, a Nelson fishing company and with the fishing industry improving should be a good diversification. They als 0 operate in conjunction with Japanese interests in the timber field.

“The six months to. September 30, showed tax paid profits of $2,872,000 as against $1,763,000 last year and with an annual dividend of 16 per cent, the present price of 272 gives a yield of

5.9 per cent. Directors anticipate that the over-all trend of improved earnings will continue in the second half and foresee a satisfactory income from trading for the full year. M. O’Brien and Company — “Footwear manufacturers manufacturing “O’B" workboots etc. “Arnies” .Golf and Casual shoes. New Zealant licensee for Adidas, West Germany, footwear. Annual Balance June 30 showed improving results with the net tax-paid profit of $203,444 paying an ordinary dividend of 14 per cent to give a return of 9.3 per cent on present price of 75c. National Insurance Company — “The National

Insurance Company are showing improving results with the latest consolidated profit for the year ended August 31 of $6,039,000 against $5,369,000 for 1979. The earnings are 40.9 c a 50c a share with a dividend of 17c a 50c share. The shares are carrying a bonus issue of 1 for 10 ex January 21.”

Sturge Wilson and O’Malley also recommended the following Australian shares: B.H.P. at 1035; A.C.I. at 215; ANZ at 384; C.R.A. at 378: Western Mining at 314: Woodside at 186. “Clients who are interested in Australian oil stocks could well consider a position in Woodside,” they say.

R. A. Jarden and Company, the Wellington Sharebrokers, say in their February market report that they expect a strong run-up for shares to the 1981 election. , “In our last market letter, dated September 26, we expressed enthusiasm for New Zealand’s longer term economic outlook and consequently viewed the sharemarket’s prospects in the same light. Taking a shorter term view, however, we expected the level of economic activity to remain fairly static and on this basis felt that the sharemarket would move within a narrow band until at least the second quarter of 1980. Since the end of September prices have in fact fluctuated over a small range and on average currently stand about 3-J per cent above the September level.”

“Because of the sharp jump in oil prices the general economic situation has deteriorated slightly over the last few months, but with the Government’s declared

intention to hold economic activity at a reasonable level we expect trading conditions to remain close to last year’s. With this background setting the over-all tone for the sharemarket, 'a generally flat trend — modified by short movements up and down — appears likely to continue for some months yet.”

“As discussed in our September newsletter we expect a sustained upturn in equities to accompany the run-up to the 1981 .Election. At this stage it seems likelv that this phase will commence in the third or fourth quarter of this year, prompted by Government initiatives to expand economic activity in 1981.” Of their investment recommendations, R. A. Jarden and Company say:—

“With the likelihood of a relatively flat market in the near future and a strong upturn over the 9/15 months I preceding the Election, we! regard.the next few months! as an opportune time to: strengthen portfolios by sei- i ective investment and saleof weak holdings. “Although there is unlike-: ty to be a significant up-1 ward movement in prices! over all in the near future, i we nevertheless consider that a number of companies: offer excellent short run po-' tential. These are recqm-1 mended below. The selections of R. A.' Jarden and company will be continued in our next, article.

This is the fifth 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 two w r eeks ago, with the selections of the sharebrokers Hamilton Hindin and Greene, Egden Wignal, and Renouf and Company. The third article was published on Wednesday last week and reviewed the recommendations of Lawrence, Millton and • Howarth, and of Jordan, Sandman, Smythe and Company. The fourth appeared last Saturday, with the selections of Chamberlain, McKie and French, and J. S. and S. M. Satterthwaite.