TNAG-0098-FCO40-134-Construction-of-a-Cross-Harbour-Tunnel-1968 — Page 50

SUNDAY TIMES

City Editor Richard Milner on ... the growing Cardiff Plant ... a new Irish issue ... bumpy ride for the Heenan bid ... Lonrho's platinum bonanza

135

E1 SEP 1968

The Hongkong tunnel to profits

WHEELOCK

MARDEN, the

Chairman John Marden has forecast a 40 per cent. dividend tentacular Hongkong-based cut to 60 cents. After years of trading group whose interests range from shipping through insurance to toys, and its asso- ciates have a £20 million problem.

Wheelock and Hutchison Inter- national both have a one-third stake in the Cross Harbour Tunnel Co., set up to promote a tunnel across from Hongkong to Kowloon, with the Hongkong & Shanghai Bank as a minority (10 per cent.) partner. So far the promoters have spent some £400,000 on survey and con- sultancy work. And they still do not know whether this is a going concern or just a hole in the accounts.

Colonel J. D. Clague, chairman of Hutchison and a director of Wheelock, gave the shares a fillip earlier this summer when he dis- closed that the UK Export Credits Guarantee Department was interested in the £20 million venture. But the ECGD seems less than ecstatic. Raised from £10 million after lengthy negotia- tion, it has now agreed to guarantee £12.5 million over 10› years "subject to certain security' conditions being satisfied.” These conditions, I gather, involve the Hongkong Government virtually underwriting the whole shebang. And despite an optional 25 per cent. participation, the Govern- ment is hesitant after last year's. Communist riots.

i

This is a blow for ECG D's un- disclosed client (Richard Costain is apparently the contractor in waiting) and for the Wheelock- Hutchison combine. W-H had reckoned that a tunnel financed largely with loan capital would be a highly commercial utility- particularly as the project would help to restore Wheelock's battered investment status, hit in 1966/67 by the high-loss foray into Australia and in the year to March 31 by devaluation and the need to provide for losses aggre- ! gating £442,000 on loans from its UK merchant banking offshoot Armore Marden to Royston Industries.

Hongkong-style trading in invest- ments (profits from this source rose to 43 per cent. of the £1.89 million gross in 1966/67), the group is having to consolidate. "You can't expect these excep- tional profits all the time," com- ments managing director W. J. Lees. With one important excep- tion, perhaps. "We are discussing

If the cash element is serviced at 10 per cent. and left over tax losses on Gould Plant keep the tax charge subnormal, I estimate that Cardiff Plant shares are now selling on a prospective P/E ratio of 12-14 at 16s-even allow- ing for conversion of the deferred. capital. For a company making optimum use of its quoted status for a systematic buildup in plant hire, this rating is too low.

certain rearrangements on the Good Judge

shipping side, which may be bene-

very

ficial all round." W. M. has a 33 TOMORROW everything but the per cent. stake in World Wide kitchen sink will be moving into Shipping, valued (its critics say a 300 sq. ft. section of Selfridges much undervalued) at to herald Britain's first hardware HK$50 million or £3.8 million shop-within-a-shop. It is the latest venture cooked up by Lloyd Ress- against a total market capitalisa- ler to push Judge International tion of around £6.3 million. enamel and plastic kitchenware Though the lacunae in the into every household in the UK. accounts make for caution, W M Since Ressler took over as chair- shares at 10s. 9d. to yield 7.7 man five years ago, he has trans- per cent. reflect past setbacks formed the afling Jury Holloware without allowing for any jam company from a loss position to tomorrow and have distinct semi- one of progressively rising profits speculative attraction in the -the pre-tax take topped

medium term.

Rolling snowball

LESLIE LOWE of Cardiff Plant believes in keeping the snowball rolling. Since the flotation in January, he has already picked up Cambrian Plant and Amber- ley Plant Hire. Now Lowe has another deal on the stocks. With- in the next few days he should be able to announce the acquisi- tion of Bond Plant, another Car- diff-based business with some use- ful National Coal Board contracts. And it sounds a regular snip. CP will fork out £100,000 cash and £60,000 worth of shares for Bond, I am told, and profits of this latest addition are running at around £40,000 a year. To take over any company at only seven times annual earnings nowadays is quite something, indicating the edge the "public" buyer has over the private seller.

Having beaten his 1967-68 pros- pectus forecast by a tidy margin, chairman Lowe recently admitted that his current-year projection of £110,000" may well have been too conservative." Some market men are going for £150,000. But assuming that (say) £120,000 is on the cards anyway, the Bond deal should give a major Allip to equity earnings.

£150,000 in 1966/7 and the trend now seems to be accelerating dramatically..

P.T.O

RECEIVED IN ARCHIVES No. 6.3 -6 SEP1968

HWOW/