GET IN EARLY

Timaru Herald, Volume CXXV, Issue 18201, 28 February 1929, Page 7

GET IN EARLY

JOHN FILLER AND SONS' OFFER TO INVESTORS. DEBENTURE ISSUE. (Bv “Fiat Lux.”) (Reprinted from “N.Z. Ti utli,” 21st. February, 1929.” For those, with laboriously-acquired savings the opportunity now presents itself to invest them at a substantial interest rate with unassailable security of capital and every prospect of capital increment. But get in early is the writer’s advice, beet use the issue will probably bo oversubscribed before closing date. j OHN FULLER AND SONS, LTD., are presenting to the New Zealand investing public a unique opportunity of investing £SO or multiples thereof in their huge Dominion undertaking at a very fair rate of interest — per cent. Due to the fact that the investment takes the form of a first mortgage debenture security over the whole of the firm’s landed property throughout New Zealand (except the new Majestic Theatre in Christchurch) and which is valued at £615,488, the most conservative investor cannot help but feel that his capital has an ample margin of security behind it. But an investor wants other assurances in addition to those covering the safety of his capital, and the principal one is an assurance that the actual or potential earnings of the borrower are sufficiently buoyant to ensure prompt and continuous payment of the interest agreed upon. This aspect of the investment has been fully covered in the prospectus by way of a report and certificate from a firm of public accountants which investigated Messrs Fullers’ audited accounts over a period of five years to March 10, 1928. The information derived from the above-mentioned report and certificate show that the present debenture issue, when fully subscribed, will enable the firm to pay off all property incumbrances (except the Majestic, Christchurch) and complete its present building programme. * When this is done it is shown that exterior rentals then receivable by the company would be more than sufficient to meet the interest on the present issue of debentures, quito apart from the firm’s income from tlie theatrical business, which, needless to say, is tremendous. Can an investor in reason ask for anything further? The present issue of first mortgage debentures is being made for the purpose of completing the building programme outlined above, and of consolidating the firm’s indebtedness into one permanent and convenient form. Just a word of explanation regarding the remark in the leading paragraph of this article : “. . . every prospect of capital increment.” Many people are unable to understand why an investment which carries a fixed rate of return should be liable to fluctuations of price on the Stock Exchange, and, by the way, Fullers intend to have this debenture stock listed throughout the Stock Exchanges, thus affording a free market for the securities.

The reason is a very simple one, really, and perfectly logical. It is smpmed up by saying that the market price of a security is governed by the market ptice of money. As an example, take the case of a well-known commercial firm which some years ago, when money was much dearer than it is to-day, issued 10 per cent, debentures without much security.

In the intervening years that concern has prospered exceedingly, and, at the same time, the return investors require upon such an investment has dropped considerably. The consequence is that those debentures to-day are worth 26s upon the open market, and even at this price the interest of two shillings in the £ per annum is equal to £7 13s lOd per cent., -which is quite a good return to-day. Now r , take the case of the debentures being issued by John Fuller and Sons), Limited. The annual interest upon each £1 at 6£ per cent, is Is 3sd. Now’, assuming the market value of money for this class of investment falls during the next few years, as there is every indication of it doing, and the market is content to accept a return of 5 per cent, on such a highly secured investment, it will follow that to capitalise this dividend of Is 3sd at 5 per cent, the market price of these debentures must rise for some years to around 265. But they will ultimately come down to par value, as the date of repayment falls due, as there does not appear to be any provision for repayment, except at par value. But there is always the chance that the firm may convert the debentures into cumulative preferred shares sooner than go to the trouble and expense of reorganising its finances. Taking the proposition from every angle, it looks good to this critic—only get in early. Application for Debentures should be made to the Company’s sharebrokers, G. Stewart Craig, Ltd., 212 Lambtmi Quay, Wellington (£.O. Box .128), or any other licensed sharebroker, or any branch of the Bank of New South Wales.