A timely article

Title

A timely article

Language

English

Source

The American Chamber of Commerce Journal Volume XVIII (No. 8) August 1938

Year

1938

Rights

In Copyright - Educational Use Permitted

Fulltext

20 THE AMERICAN CHAMBER OF COMMERCE JOURNAL August, 1938 A Timely Article The question often arises as to which of the two issues, Benguet or Balatoc, is the better buy. This, naturally, is rather a difficult question, but a consideration of certain pertinent facts and a brief com parison of the two issues will, it is be lieved, give a good answer. In 1937, Balatoc reported a net profit, after all charges including depreciation of Pl .09 per share, the amount per share before deducting depreciation being Pl.19. This profit was reported from an average monthly production of 37,000 tons of an average value of P29.26. During the first 6 months of 1938 Ba latoc produced a monthly average of 36,646 tons of an average value of P29.13 per ton. After deducting all costs, in cluding depreciation and depletion, the net profit for the period was P3,489,234, an amount equal to BO.58 per share. This is equal to Pl.16 a share on an annual basis or slightly more per share than the 1937 actual results. Based on the present capital of 6,000,000 shares, Balatoc paid dividends amounting By Clay W. Crane Statistician, Hess & Zeitlin, Inc. to Pl.00 per share in 1937. In March and again in June of this year, a dividend of P0.30 per share was paid. This would in dicate that Balatoc might pay Pl .20 per share for the full year 1938. The first six month earnings, however, indicate that Balatoc would have to extend itself some what in order to pay that amount. It must be remembered that Balatoc cannot pay much more than it earns because there is practically no accumulated surplus from which to draw. (On June 30 earned sur plus totalled P14,280.) Indicated ore reserves at Balatoc give rise to the belief that the life of this pro perty will be exceptionally long. The milling capacity, which will be gradually increased until it reaches a daily average of 2,000 tons, will make available a larger amount of what is now termed marginal ground. Although it is not expected that the increase in milling capacity will have much effect on earnings, it will undoubted ly prolong greatly the life of the mine. Therefore, taking earnings, dividends and the possible life of the property into consideration and giving consideration also to its management and financial backing, it would seem reasonable to as sume that this stock could sell at ap proximately P10.00 a share or ten times actual dividend and about ten times earn ings. At any higher level it would appear that this stock was selling more on a speculative basis than as an investment. Assuming, as has been pointed out, that Balatoc is worth P10.00 a share—what is Benguet worth? For each share of Benguet the holder has an indirect ownership of approximate ly two-thirds of a share of Balatoc. With Balatoc worth P10.00 per share, it would mean an indirect ownership through a share of Benguet of P6.65. The next ques tion to consider is what the Benguet di rect interest is worth, not counting the interest in the Balatoc stock. In 1937 Benguet reported a profit, from its own. operations, of P5,170,624, an amount equal to P0.86 per share on the 6,000,000 shares of Benguet outstanding. This profit was reported from an average monthly production of 32,010 tons of an average value of P920.440. (Please turn to page 26) Cog upon cog - part after part were pieced together with utmost precision, and so the first miniature camera with built-in photo electric exposure meter look shape, the first camera to have focal plane shutter speeded to V1000 second, complete with incorp orated self-release, and ground glass distance meter giving the requisite accuracy of focussing for ultra-rapid Zeiss lenses up to f/1.5 - the CONTAFLEX by Zeiss Ikon. Then again the film and shutter winding are inter connected, the camera back is detachable and the excellent sports finder on the van Albada principle has been embodied. In brief, the Zeiss Ikon CONTAFLEX is a reliable all-rounder. For informative brochures and unconditional ad vice please apply to .. . Literature on Request BOTICA BOIE 95 ESCOLTA P. O. Box 299, Manila IN RESPONDING TO ADVERTISEMENTS PLEASE MENTION THE AMERICAN CHAMUER OF COMMERCE JOURNAL 26 THE AMERICAN CHAMBER OF COMMERCE JOURNAL August, 1938 A Timely. . . (continued from page 20) During the first 6 months of 1938 Ben guet produced an average of 35,809 tons of an average value of P28.27 per ton. From this production Benguet reported a net profit, from its own operations, of 1*2,728,808, equal to P0.45’/2 per share. This is an amount equal to P0.91 pei* share on an annual basis. In analyzing Benguet’s 1937 income account it appears that of Benguet’s earnings about 95% comes from the operation of its own property and that of its wholly owned subsidiary, Cal Horr. Income from secondary operations by virtue of management contracts, etc. amounted to only P109.484. During the first 6 months of this year, instead of having an income from secondary opera tions Benguet actually suffered a loss. Although it is expected that the increase in Benguet’s milling capacity will be re flected in a larger tonnage, it is not thought that it will exercise any influence in the per share earnings; however, as in the case of Balatoc, it is expected that the life of the property will be prolonged. Therefore, using the same yardstick for Benguet as was used for Balatoc, or ten times earnings, it can be estimated that a share of Benguet alone should be worth about P8.60. In addition to the earnings and the life of the property, the dividends paid should be given some consideration. Based on 6,000,000 shares, Benguet, in 1937, paid dividends equivalent to Pl.00 per share. In March and again in June a dividend of P0.30 per share was paid. It would appear reasonable to assume that divi dends of an equal amount if not more will be declared and paid in September and again in December. As has been seen, through a direct ownership of one share of Benguet, the holder has an indirect ownership of twothirds of a share of Balatoc, which amounts to P6.65. Also, that through direct ownership, the share of Benguet is worth P8.60. Together, through direct and indirect ownership, a share of Ben guet should be worth P5.26 more than a share of Balatoc. It must be remembered that the above hypotheses are theoretical and based en tirely on a ten times earnings and divi dend ratio, but they are given in an at tempt to answer the prevailing question as to the theoretical comparative value of the two issues. The Stock. . . (continued from page 21) sagged lower. Trading was extreme ly thin. News dispatches regard ing the Russo-Japanese border com bat undoubtedly contributed to pes simism, although other security marts were little affected, and ob viously interpreted the affair from the beginning as a mere border clash which was unlikely to develop into war. The New York market moved higher, and higher prices prevailed for most commodities. Large purchases of gold bars featured the London gold mar ket, at successively higher prices. The purely seledtive character of this market became clearly apparent during the last week. Averages moved up due to higher offerings for blue-ribbon issues. However, although the averages went to 80.01 (the first time they had broken (Please turn to page 28) TABACALERA VICE PRESIDENTE ‘Beals them all IN RESPONDING TO ADVERTISEMENTS PLEASE MENTION THE AMERICAN CHAMBER OF COMMERCE JOURNAL

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