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Stanley Gibbons' shares still worth collecting
Archived article dated Thursday September 4th 2008
Amid the meltdown of financial markets and collapse in share prices one of the rare bright investment spots is stamps and collectibles.
By Glynn Davis
As an alternative asset class they traditionally come into their own during difficult economic conditions being regarded as something of a safe haven for wealthy investors.The most recognised player in this field in the UK is Stanley Gibbons and its interim results in August highlighted just how well it is delivering impressive numbers when all around it are being buffeted by the global downturn.
For the six months to end-June it reported a six per cent rise in pre-tax profits to £1.9 million on turnover up 12 per cent to £9.8 million. It is not difficult to see the attraction of its core product when you consider that the British stamps index, the GB30, has increased by an impressive 39 per cent over the past year. This is pretty decent going when you compare it with the general retail index that has dropped by almost 45 per cent over this same period.
Although this uplift in the GB30 has not translated directly into a similar share price gain for Stanley Gibbons - it shares stand at 180p, compared with a 12-month high of 239.5p - they have still enjoyed a solid past two months moving up from a low of 138p in early July.
This fully justifies the 'Buy' recommendation that was re-iterated in a note from Seymour Pierce immediately after the results when the shares traded at 157p, giving it a PE of a modest 8.6x 2008 earnings. Although this has now been pushed up to approaching 10x there is still much to be positive about Stanley Gibbons.
For starters there are good signs emanating from the company about its move into potentially lucrative overseas markets. Although the company does not break down its international revenue it has signed up agents for selling its products in Hong Kong, Canada and Japan and is in discussions with eight other potential partners that should take it further into its number one target market - Asia Pacific. Management states that this will contribute to sales growth in the second half and beyond.
Secondly, the company is making great progress with its online operation, and in contrast to its overseas business it does give sales derived from its website. This is particularly impressive as 24 per cent of group sales are now attributed to customers recruited from its websites, which compares with only 12 per cent last year. Further online investment is planned and the company expects the returns from this to begin to fully flow through during the course of next year.
Stanley Gibbons' prospects could also be boosted by a business acquisition or a purchase of a large inventory, of which it is open to both, although this has been mooted over the past 12 months and little action has so far been taken.
But the fact that it has the firepower to even consider such a move is testament to its strong position and this is further highlighted by its 50 per cent increase in spending on publicity and marketing - to £350,000. This is evidence of management's confidence in the prospects for the company and shows the contra-cyclical nature of the business.
Despite the recent share price rise, which has since it outperform the rest of the sector by some way, it would probably be a sensible move for investors to gain some exposure to Stanley Gibbons during these troubled times by collecting a few of its shares.
Tagged as: glynn davis | stanley gibbons
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