Current Price Levels Do Not Reflect Relative Buoyancy Of Industry

Otago Daily Times, Issue 27212, 15 October 1949, Page 3

Current Price Levels Do Not Reflect Relative Buoyancy Of Industry

By Gregory

INVESTMENT MARKET

The firming tendency of share prices was maintained and even accentuated during the week, but as has been characteristic of the movement, it devolved on a few selected issues to make the contribution to the trend. The movement has persisted for some weeks now, however, and the majority of leaders have joined the stream, whilst some have even ventured to higher limits in leap-frog fashion. The movement has not been accompanied by vigorous or even keen buyerapproach, but the tardiness of buyers in this respect has left vendors unmoved and they have patiently awaited, and. almost invariably secured, their limits. Company news from near and far was consistently good and current share prices scarcely reconciled with the state of business, industry and commerce as revealed by individual balance sheets. The price structure of a selected group taken from amongst acknowledged share leaders reveals that present day prices are below 1945 levels, despite in some cases higher dividends, and in all cases a successful negotiation of the difficult transition from war to peace conditions. The gold section was actively inactive, with the majority of issues quoted daily once again, but. at safe distances to the detriment of turnover. Mount Morgans in the Australian section quietened to 14s (buyer) and 14s 4d (seller), but Broken Hill Souths at 47s were at their highest point since August, 1948, when the exchange rate between Australia and New Zealand altered. DIC ordinary shares sold at the unchanged figure of 29s 9d after he annual dividend announcement, the payment accruing to the buyer

The DIC annual announcement was keenly awaited, and at 10 per cent, on the ordinary shares, was no disappointment, despite the fact that on the face of it, it' represented a 2i per cent, reduction on the preceding annual payment. The new bonus shares also participate, and as a consequence, shareholders will receive a slightly larger cheque than they did a year ago. and this will vary between 8s and 8s 4d per 100 shares, according to “their respective allotments of bonus share fractions. A shareholder who owned 100 ordinary shares a year ago, for instance, will receive an additional 8s on his dividend cheque this year, and a holder of 300 shares will. notch

an increment of £1 ss. In such circumstances, dividend reductions are quite palatable. From four city blocks further south came the intimation of a 15 per cent, ordinary dividend by Brown, Ewing and Co., Ltd., to equal last year’s distribution, but no sales of the shares have been recorded since the announcement of the bonus share distribution, and' buyers dropped their offers only a nominal amount when the shares became ex dividend ’’ (they are still " cum bonus issue ”) during the week. The chief interest •in the retail group, however, was again concentrated in the ordinary shares of Macduffs, Ltd. We blew cold and then cool during the past month in this column on the likelihood of G. J. Coles and Co. buying the chain, and now we have to blow hot. Two G. J. Coles and Co. representatives were in the citv recently in the course of a tour of the entire chain, and this fact would seem to identify Australia’s largest chain store organisation as the prospective buyer. Tlie market is of two minds as to either the authenticity of the rumour or the price likely to be paid. The shares touched 12s 6d again during the week, but the weight of selling restored the l?s level before the week was through and brought ready buyers back into the market. Killings of lamb and mutton at the South Otago Freezing Works were the fourth lowest .in a decade, and beef killing the third lowest, but the net profit result after generous provisions had been made was only £IOO or so less than last year, when the main killings were topped only by the„ 1941 season as a record for the' 10-year period. Income from investments, lower by £SOO, more than accounted for the contraction in profit, so that from trading a higher profit was made from considerably less througput. The reduction of 1 per cent, in the dividend was in contrast to that* of the Southland Frozen Meat Company, which a few weeks earlier raised its interim distribution “ cum ” Vestey or no. Some substantial transfers have been made to bring the reserve account from £2457 to £25,000, which is 10 times larger than it has been since 1937, when it was deflated to provide part of the wherewithal for a 1-for-l bonus issue. Shareholders are being - currently bombarded with circulars from candidates for election to the directorate, but none of them is vocal on the question of policy, and consequently little interest has been aroused.

A comparison between share prices today and those ruling in 1945, when industry was in the throes of re-adjusting itself to peace conditions, taxation was at peak war-purposes levels, and workbenches still awaited the laying down of rifles, reveals a sorry picture of defeatism or pessimism or somesuch, The following is a table of selected issues from a variety of sections of the market and is sufficiently comprehensive as to be indicative of the imoderation of current

price .levels: — Prices. Share Oct.; 1945. Oct., 1949. Woolworths. NZ 24/9 23/9 NZ Breweries 46/9 '43/9 Kempthorne Prosser 5/6/5/1/6 ■South British Insurance 88/NZ Paper Mills 37/Wilsons Cement 19/3 17/71 Fletcher Holdings, ord. 34/30/3 Silknit. NZ .. .. 28/25/6