Tabell’s Market Letter – December 16, 1955

– Walston &Co. —-Inc.—- II ' MEMBERS NEW YORK STOCK EXCHANGE AND OTHER LEADING STOCK AND COMMODITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO ISw,t,ldl r OFFices COAST TO COAST CO'lNECTECi BY DIRECT PRIVATE WIRE SYSTEM TABELL'S MARKET LEnER , December 16, 1955 The usual year-end irregularity has taken over the market and continued ross-currents are to be expected until later in the month. Technical ction still indicates the possibility of another attempt to penetrate he 1955 high in the averages early in 1956 led by the more speculative ssues. Would continue to use strength to lighten holdings in longer-term apital appreciation accounts. There may be some excellent trading moves ver the next month. UTILITIES Statistics Market Dividend Yield 27 1.90 3,7 ong Term Debt 43,566,416 fd. Stock (100 Par) 150,000 shs ommon 2,000,221 shs et Per Share, 1955 et Per Share, 1954 1.45 E 1.46 perating Revenue, 1955 perating Revenue, 1954 'arket Range 1955-54 22,000,000 21,961',000 E 32t-19 Montana-Dakota Utilities was first recommended in this letter almost a year ago. At that time it was stated that the common stock represented a rare combination of the investment appeal provided by a fine growth utility plus a speculative land play by reason of the company's extensive leaseholdings in the oil-rich Williston Basin. Since that time, numerous developments have taken place which tern to improve both aspects of MontanaDakota's position. Despite this fact, the stock has done little marketwise and still appears att-' ractive for purchase close to current levels. To get a true picture of Montana-Dakota it is necessary to split it into its component parts. First and largest, of course, is the utility business, .seryingone ofthe ,rno st imp.o.I'.tant-.grnw.thareas,pf….thecoountry.. -,,;I'hisgen- erated 1.46 per share of earnings in 1954 and should earn about the same his year, although a' portion of the properties have been sold and a larger umber of shares are outstanding. Capitalizing these earnings at 15 times, a conservative p!e ratio compared with other growth utilities, gives a curent value of 22t for MDK's utility operation. A pie ratio of 17-18, not nduly optimistiC considering the long-term potential, gives a price equal vO the current market. Therefore, a price of nothing to 4 is being paid for the land play involved. This is provided by mineral rights which MDK holds under lease or perating agreement on 220,000 Williston Basin acres. Immediate interest ies in the 90,000 acres on the Cedar Creek Anticlir,e in Montana, which has een drilled extensively by Shell Oil. Since the original recommendation f Montana-Dakota in this letter, the crude-oil pipeline connecting eastern ontana to midwest refining centers has been completed, thus .providing a arket for the oil. Under leasing arrangements, Shell receives its orignal exploration and drilling costs before any accruals-to MDK. This '.(,1l1d be completed in two years, at which time ana–Dakota would be- in to participate in oil royalties. Earning from this source should pro- uce 40 to 50 per MDV 3hare initially followed by possible much higher evels as exploration progresses. A spin-off of the oil holdings to ontana-Dakota shareholders is, course, .always a possibility. As was stated above, Montana-Dakota's utility business possesses consic- rable investment attraction in its own right. The company serves almost he entire Williston Basin growth territory which has a sound agricultural ase and is expanding at a tremendous clip due to oil and industrial act- 'vities. MDK provides both gas and electrical service for these territories nd during the period 1950-54 was able to expand gas revenues almost 75 nd electric revenues almost 35, at the same time imprwiing the balance heet position. In summary, Montana-Dakota at present prices seems to combine true in- estment value, plus promising possibilities for additional capital gain hrough oil production. From a technical point of view,-the long-term ndication cont to be 45, followed by a ossible 60-65. There is eontamel herein 1'1 not by & Co Ine have an lntere-t In tM news and not a ehaanodre …, ',. letter w With rnped. to any .untles Stockholder may commentary on day to day market upon request. WN 30t —