DETAIL IS LACKING

NZ Truth, Issue 1238, 22 August 1929, Page 20

DETAIL IS LACKING

Share Prospects \

Financial Reviews

Whangarei Developments, Ltd., And £12,000 Scheme

UNDERTAKING ANALYSED

' (By "Fiat Lux.")

If the' intrinsic value of this proposal of Whangarei Developments Ltd., is no greater than the value of the * Prospectus as a prospectus, then, should the scheme mature, it is likely to prove a sad disappointment to many, but not to all connected with it. , . v

VERY briefly, the idea propounded is to form a company with a capital of £15,000 of which £12,000 is to be issued and the balance held m reserve for future issue at the discretion of the directors. With the proceeds of this issue and a mortgage on the property, it is proposed to acquire the freehold corner of Bank and Manse Streets, Whangarel, and to erect thereon and equip a block of brick buildings containing picture theatre, cabaret and nine shops and also to carry on the business oftheatre and cabaret proprietors, caterers. The promoters talk optimistically about what is to be done and the following paragraph outlines their, opinion: — "From a purely business point of view, they state, the proposition is sound and investors should have no hesitation m applying for shares."

The writer would like to know from what other point of view the promoters would expect investors to consider the matter, other than that of a business proposition. "Fiat Lux" has examined the prospectus with great attention to detail, but without learning how much money this scheme is going to* cost. The only points which are made quite clear m this connection are as follows: (1) T\he

being invited to put up its money for a venture without knowing just what that venture is going ) to require m the way of money to carry it through. Maybe, the promoters' notion is that they will first find out how much money they can get and then make tfieir buildings, plans and consequentially their capital expenditure '.fit the public's response. In .any case, assuming that ,£7OOO of shares are underwritten and the company's preliminary expenses do not exceed the £500 estimated, the flotation costs will then exceed 16 per cent, of the subscribed capital. The promoter of this estimated 11 per cent, dividend proposition is "Business Organisers Limited, a duly incorporated company whose place of business and registered office is situated at De Tourrets Buildings, James Street, Whangarei," and which will receive a commission not exceeding 6^ per cent, on all shares allotted or oh all applications lodged by or through them. Then provision is made for an additional underwriting commission of 2% per cent. Except as aforesaid no payment of any kind is -to be made to- any individual or i company for promoting this company. The provisional directors and offi-cers'of-the proposed scheme are: —

Provisional directors: Peter R. Gardner, pottery manager, • Karao, chairman; W. G. D. Evans, engineer, Whangarei; W. H. Wood, retired, Whangarei; H. A. Cowper, retired journalist, Whangarei; Harold Bradley Brownrigg, company organiser, Whangarei. Bankers: Bank of New South Wales; solicitor, A. Marsden Woods; auditors, to be appointed; secretary, Edgar Middleton; registered office, De Tourrets Buildings; chief •brokers, Business Organisers' Limited; office of above, De Tourrets Buildings. Intrinsically, "Fiat Lux" considers the whole scheme highly speculative m these days of huge combines operating chains of thea- . tres and buying their film requirements direct from the manufacturers. The whole scheme would probably collapse like a house of cards should one of the big firms start a picture house m the town. In any case, if the detailed estimates of receipts and payments (which the public is invited to inspect at Whangarei) can show a probable net profit of only 11 per cent, it is not very alluring for investors. Another point this writer cannot quite understand is why it is proposed to erect this huge building m brick. Most modern theatres are m steelframe concrete construction which is claimed to be Are and earthquakeresisting to a very high degree. Two. other most important points which potential investors w.ould do well to look into are: (1) Who is to be the architect; and (2) who is to be manager.

public is invited to subscribe £12,000. (2) Enquiries made by the promoters indicate that a first mortgage can be raised "to cover most of the cost of the buildings." , These two ideas would appear to exhaust the promoters' sources of capial receipts, but what the. amounts are likely to be this critic does not know, as no indication, whatever, can be found of the probable cost of the buildings and equipment. Maybe, this point has not been gone jinto/ by the promoters, but if it has the result is not contained m their prospectus. I So far as the question of the amount of shares likely to be sold is concerned, if Whangarei people are as good judges of a proposition as this critic believes them to be then the number of shares which will be taken up will be very small. In any case, the minimum subscription, is £7000, so the company cannot proceed to allotment until this sum is subscribed. What capital expenditure has to be faced? , ' Consider tho items enumerated and see how many have estimates of cost supplied m the prospectus. Preliminary expenses, £500 estimated; brokerage and underwriting, 9 per cent, on £7000, £630 on minimum subscription; Purchase of land, £3000; building m brick picture theatre to seat 1000 people, modern equipment, including "provision for installation of talkie picture equipment," also a cabaret and nine shops,, no estimate given. Thus'we find that the public is