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The calculated net current asset value, NCAV, of Stanley Gibbons (LSE:SGI) is one-quarter larger than its MCap. However, the NCAV numbers relate to September 2015, and there are many negatives in the current outlook. But do the positives outweigh them? I’ll list the main points here and make a decision on whether to invest.
Negative factors at play
1.Experts gone
It has lost a number of key experts with vital contacts and reputations, particularly in the antiques businesses.
2. Neglected stamp collectors
It has not supported the stamp collecting community or promoted its services as well as it should. Has it lost the bulk of its previous goodwill and loyalty?
3. Hidden losses.
The auditors have insisted on the accounts being re-calculated resulting in a mark-down of net assets (the directors overstated prior year numbers). But in yesterday’s announcement the directors choose not to quantify the loss. Why? Perhaps this is so big that they want to delay the shock that it will cause. The mere fact that they choose not to share such vital information with shareholders is a large negative in my view. Once these accounting adjustments are made the NCAV could fall below the MCap.
4. Inexperienced directors
The new senior team have a great deal of general business experience, but little of that is specific to collectibles.
5.Stamp and coin inventory value doubts
Could it be that the market prices have been artificially inflated by Stanley Gibbons themselves because they can influence them?
6. Borrowings
It still has bank debt of £16m and other liabilities – could that debt sink it?
7. Dominant shareholders
Is it possible they could run this company in their interests exclusively, to the detriment of small shareholders? Their reputations are not so high that we should be completely relaxed on this point. More time for evidence of their integrity regarding the interests of all shareholders is needed – this will take time.
Positive factors at play
1.NCAV is apparently one-quarter larger than MCap.
This is after devaluing inventories by one-third and receivables by one-fifth – these deductions provide some shock-absorbency for the forthcoming announcement on accounting adjustments.
2. Many of the brands are still strong in the minds of collectors, e.g. Stanley Gibbons in stamps and Baldwins in coins.
Catalogue brand is strong. Valuation expertise and integrity remains (I think). Availability of a wide-ranging stock is a pull factor for collectors. SGI retain……………………..To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
