Turnover Lower But Demand Maintained

Otago Daily Times, Issue 26778, 22 May 1948, Page 3

Turnover Lower But Demand Maintained

By Gregory

Turnover on the Stock Exchange this week was below the high rate achieved in the preceding week but nevertheless good business was transacted considering' the fact that buyers had to step up tp a new level of prices to obtain their requirements. The inharmonious state of international relations has become habitual and is receiving less cognisance in investment circles than the mere Molotov frown of a couple of months ago. Company news has been consistently good and trade prospects are clearly indicated by the succession of bonuses and dividend increases which studded the week. •

Tooth and Co.. Donaghy's Rope, Wilson Cement, Relax. Ltd., and A.C.I. all announced increased dividends on successive days and. what is more important, their contributions represented 40 per cent, of the total announcements made during tlie week. Tile actual dividends concern shareholders only but the trend which they combine to create is of foremost market significance and has heartened an already keen array of buyers.

A powerful market developed overnight in New York a week ago and a shortwave news item on Sunday last revealed that two and a-lialf million shares were traded on Wall Street, a gross not exceeded on a short-session, as Saturday morning trading is called, since 1933. Daily turnover of recent weeks has been in the vicinity of a million shares for a full business day and with the eventual penetration of railroad stocks on the Dow Jones index (an event which has been keenly awaited in the United States) general confirmation of a stable “ bull ” market was established, and a wave of buying commenced which, it is predicted, will be on considerable duration and may establish new levels.

Where sellers competed to unload Mount Lyells a week ago after the disappointing “no dividend" declaration, buyers tentatively ventured in the early part of the week;‘and meeting little response moved their offers up to 30s 3d at the close of business yesterday. Chas. Begg and Co. shares stole the limelight when abrupt and avid buying carried the new issue shares up to 35s in mid-week and buyers were displaying unabated interest at the close. The company's year ended on March 31 last, and although the annual dividend will not be decided until July, market tipsters coPERTINENT POINTS “My colleagues and I, who are at least 60-hour a week men, acc9pt work as a hobby and that goes a long way to make it both successful and pleasant,” Mr W. J. Smith sneaking for the management and staff of the A.C.I. Company at the annual meeting. cede the company a generous share of a record spending year and regard dividend prospects highly. This column drew attention to the shares of Begg and Co. two months ago when it sketched the possibilities represented by the company's financial interest in the “ song-hit ” “ Now is the Hour," which was “ discovered " by Miss Gracie Fields and overnight adopted by America. The profit-earning likely to accrue in this ..quarter is of course supplementary to that derived in the normal course of the company's business, but nevertheless may be quite considerable. The bonus season was opened in the preceding period with a 2J per cent, addition to the final payment by McKenzie's Department Stores and this week Donaghy’s Rope and Twine added a bonus of Is to its final distribution for the shares in existence prior to balance date. In the case of McKenzie’s the " sweetner ” represents a share in the prosperous year the company enjoyed, but in respect to Donaghy's Rope, the bonus has no relation to the company's profits and is specifically described as a distribution of certain profits accumulated over a number of years by a subsidiary and on that account must be regarded as non-recurring—except perhaps until the effluxion of a few more years. It is difficult to find justification for the decision of the company to allow only “ old ” shares to participate in this windfall, particularly when the terms'on which the recent new issue shares were offered made no provision for such discrimination.

The offer to shareholders stipulated the inferior rights attaching to the new shares as to dividend from profits earned by the company, but in all other respects the shares were issued to rank pari passu with existing shares. The particular clause (J) can be quoted from the letter of offer tor shareholders; “ The new shares will not participate in any dividend declared before June 30, 1948, in respect of profits earned by the company up to March 31, 1948, etc.” The qualification “in respect of profits earned by the company ” is specific and definite and the authority of the company to deprive otherwise equally ranking shares of a bonus which is emphatically and correctly described as being other than from " profits earned by the company ” appears to be dubious. A legal interpretation of the word "profit” might be involved, but the intention of the company to permit only capital employed in 1947 to share the trading profits of that year is unmistakable, shareholders are entitled to ask at the annual meeting on Monday week whethet the further discrimination against the new issue shares can be reconciled with the terms of the offer to shareholders.