SUN COMMERCIAL SERVICE

Sun (Auckland), Volume II, Issue 400, 14 July 1928, Page 12

SUN COMMERCIAL SERVICE

A special section for readers seeking information on financial and commercial questions is included in these columns every Saturday . Names and addresses must be given in every instance, although not for publication, and inquirers are requested to send in questions early in the week addressed to the Commercial Editor, THE SUN .

‘Anxious,” Hamilton: Yes, the receipt held by you secures your position.

*T.K.,” Auckland: We would have to see the report in question before we could offer any comment.

P.A., Te Hatu.—The negotiability of scrip should always be one of the first points inquired into by a prospective investor. On this point alone the Selwyn Timber Company shares lose their appeal. They are not listed on ’Change and even among unlisted companies are not quoted, no sales being registered over the past year or so. Jn fact, it is difficult to arrive at their approximate market value, as brokers know little about them. Consequently they might prove very hard to quit at their real value on short notice. Another point to consider, if you are thinking seriously of investing in the scrip, is that timber shares, even in the biggest, long-established companies are not a popular investment at the moment, although, of course, better times must be ahead of all the best managed concerns. "Constant Reader,” Ponsonby: Your second proposition appears to be the only one worth considering if, as you state, you desire a sound investment. All this talk about a new bank is very much in the air at the moment, and, even if something tangible did eventuate, it is certain there would be very little in it for shareholders over the period you mention. Established banks and insurances and well-managed industrials similar to those mentioned certainly offer the best proposition. Yqu are sure of a steady, if comparatively low, dividend return, and are almost certain to participate in the various gifts to shareholders from time to time. We would be pleased to review and give an opinion on any company you should select. "Amateur,” Mt. Albert: It is certainly advisable to spread your risks, but, with the sum you mention, this can be overdone, as small parcels are often harder to quit and have to be sold at a slight discount, compared with parcels of 100 shares or £IOO worth or more. We would be inclined to consider only two companies in the meantime. Proposition A, with net tangible assets of £5 7s 6d a £5 share shown in the. latest balance-sheet, with the market around 86s, is not considered very attractive for the reason that competition in the fertiliser business is particularly keen, and the competing companies to date do not seem to have been able to arrive at a working agreement that is very satisfactory to the shareholders. The decreased earnings for 1928 is evidence of this, while the reserves and financial position of the company are not very satisfactory. Propoposition B from your point of view is certainly sound, and practically gilt-edged. Dividends, if you are prepared to wait, would not be the only return. Proposition C, with a return of 9 per cent, on the present market, appears to have a certain attraction. , The point to be remembered here, however, is that the control is right out of the hands of the shareholders, who do not have the right to elect directors. Owing to a decided disinclination to disclose too much in its balance-sheets, it is hard to arrive at the exact position of the company or to forecast its prospects. As a sound investment with a prospective value the scrip is not considered very attractive. Proposition D is regarded as a fairly sound concern, although there is nothing to indicate that the prospective value of the scrip is high.