Mallett Share Discussion Threads

[rainmaker] 19/4/2012 18:32

Apparently you can get a report on Mallett(MAE)'s estimated worth/intrinsic value and other factors, or any other PLC for that matter,from VectorVest



If you click on "Get Report" link and enter an e-mail address and the Company's epic ie MAE.L for Mallett or BMY.L for Bloomsbury. Apparently Mallett's is 104p v current market price of 79.5p but I can't confirm that personally as the information is second hand.

I make Mallett's intrinsic value to be 171p currently but I'm taking into account qualitive as well as quantative factors

regards

[rainmaker] 19/4/2012 13:42

Hi Playful-thanks,it's ok for People to disagree, I really don't mind but they need to substantiate their conclusions with some logical reasoning backed by solid objective research or they'll show themselves up.All Investors need to think and act independently, a bit of common sense also wouldn't go amiss.Is the annual Masterpiece Arts and Antiques exhibition really only worth £5k or £25k with annual profits of £362k?Does it affect the valuation if the exhibition has been going for 3 three years or is only open 6 days a year, or only cost £150k each from 5 equal partners, mean that it can't be worth millions?

regards

[playful] 18/4/2012 23:24

I agree with RM and those that criticise should really go back and to their research...

[orinocor] 18/4/2012 15:46

Rainmaker quote:

>>IMHO you have to value the whole business at least 4 times annual turnover so circa £30mln with Mallett share worth £7mln, if not more.>>>

So this piddly little subsidiary of Mallet should be valued on a PE ratio of at least 115, IF NOT MORE, according to this guru. Make up your own minds everyone.

[rainmaker] 17/4/2012 01:11

Investors Chronicle's Mallett(MAE) tip update entitled "sense of excitement"-no date but published in the last month or so or they refer to the £1.7mln received for the sale of their New Bond Street lease. Not too sure that the bit about them rolling forward £3mln of tax losses is accurate as I believe they gave them up as they could not certain of the timing of the recovery. However the previous rent figure of £650k is definitely incorrect as it was £1.2mln after the 5 year upward rent review.





regards

[rainmaker] 12/4/2012 21:22

In the words of the legendary Fidelity Fund manager, Peter Lynch"An asset play is any Company that's sitting on something valuable that you know about, but that the Wall Street crowd(ie the market)has overlooked"He probably had land rich American railroads in mind, as these Companies were given land by the US government in the nineteenth century, to encourage them to develop a rail infrastructure but they retained all the oil, gas, mineral and timber rights as well. Towards the end of the twentieth century these Companies began to capitalise more on their natural resources than their rolling stock.

Antiques Dealer,Mallett's lease at their old address in New Bond Street was a good example of an asset play (or for that matter hidden value)with a lease worth £1.7mln that had been depreciated to the extent that it lay in non currents assets with a value of just £255k and Investors buying Mallett's shares paid nothing for the proceeds of the sale of this lease since the shares are trading at less than their net working capital.The receipt of the sale proceeds will take Mallett to a net cash position.

Mallett's antiques restoration business, Hatfields, occupy a building at 149 Clapham High Street,Clapham bought for £1.35mln in 2003 which was fairly recently revalued at circa £2mln so it's value is neither hidden nor does it make £11mln market cap,Mallett an asset play although at current prices you get this asset free of charge.As already stated Mallett will sell this building once it's full price is achieved.

However aside from the knowledge that Mallett's decorative arts business is cyclical, IMHO unquestionably the asset play and indeed hidden value lies in their 23.75% stake in Masterpiece, the annual arts and antiques exhibition. Launched just three years ago and already profitable,in just it's second year, there was a 58% rise in visitors last year and a 28% rise in exhibitors.Both are set to rise again this year, according to the Antiques Gazette the number of stands will increase from 152 to around 166.

Masterpiece made Mallett £86k last year so the whole exhibition made £362k and applying a 26% tax rate means the net income was £268k. You could apply an arbitrary 15 times earnings criteria to get a valuation of £4mln for the whole business with Mallett's share worth just shy of £1mln but IMHO,I believe if you understand the business model, then you would realise that valuation to be a huge miscalculation.

You could use a medium dated Government bond yield of 2% to produce an earnings power valuation ie how much you would need to invest to produce annual income of £362k so 100/2 x 268k so £18.1mln with Mallett's stake worth £4.30mln but again IMHO this would definitely be a mistake since Masterpiece are enjoying growth with annual increases in stand prices, the number of stands and visitor numbers all of which this valuation model fails to capture.

Given Masterpiece's expanding value ie rising number of stands and stand costs together with rising visitor numbers,it's advantageous business characteristics such as it's strong business franchise, scalability,cash generative nature,it's negative conversion cycle means that IMHO you have to value the whole business at least 4 times annual turnover so circa £30mln with Mallett share worth £7mln, if not more.

AIMO, DYOR etc
regards

[rainmaker] 04/4/2012 02:02

No RNS re recent 100k purchase so has to be a new buyer or buyers and since no major shareholders have sold shares then the free float is shrinking. I calculate that they have accumulated slightly under 3% (if a single buyer)so another large purchase will take them over this figure and we will discover their identity. I wouldn't be surprised if it's a arts and antiques exhibition organiser.

I believe that the restoration business, Hatfields will move "in-house" at Mallett's new premise at Ely House, 37 Dover Street.Originally Mallett were supposed to be moving to a smaller showroom but their new address is some 3,000 sq ft larger than their old New Bond Street premise.This will allow 49 Clapham High Street to be sold.

regards

[rainmaker] 02/4/2012 12:51

A 100k trade this morning at 79.5p.(13.28 2/4/12, sorry correction edited from 78.5p to 79.5p)

regards

[rainmaker] 01/4/2012 01:45

Re Mallett(MAE),unchanged at 77p/82p, just something I missed in the previous post.It looks as if Mallett are set to unlock capital tied up in the premises of their restoration business,Hatfields-see last paragraph of statement taken from their recently published accounts.This Company occupies a building fully owned by Mallett at 49 High Street,Clapham,London and IMHO is worth at least £2mln(that's also the last valuation I saw last year) that's approx 15p a share.I'll double check but I believe it's valuation was reduced from £2.2mln so statement suggests they are holding out for a higher figure of £2.2mln or maybe even £2.5mln or more.Property was bought for £1.375mln in 2003, see second sentence of second paragraph of link below-





A sale and leaseback is a possibility but the statement suggests an outright sale.Mallett's current market capitalisation is circa £11mln and they made net income of £458k or 3.44p a share in the twelve months to 31 December 2011


"Hatfields increased its third party revenue by 5%, but the restoration work given to it by Mallett and its other shareholder, Gurr Johns Limited, reduced significantly resulting in a small operating loss overall. Hatfields continues to provide a vital service to Mallett in ensuring Mallett's pieces are restored and maintained to the highest quality. However, it needs to create a more sustainable platform that is less reliant on shareholder business and we continue to look at ways to produce this. We also have capital invested in the premises that Hatfields uses and this is an area where further cash can be unlocked as and when appropriate value can be obtained."
All IMHO, DYOR etc
regards

[orinocor] 31/3/2012 14:59

How is Masterpiece doing?

Masterpiece London Limited put on its second fair at the end of June at the Royal Hospital, London. There were 152 exhibitors at the fair and 28,000 visitors over its six days which represent a 29% and 58% increase respectively on the previous year's fair. In addition, £450,000 was raised for the charity Clic Sargent through a Midsummer party during the fair. We are very pleased that the fair became profitable in only its second year of trading and Mallett's share of that profit was £86,000. The majority of the cash injected into the company by the shareholders in equal proportions during the set up and first year of trading has already been repaid. The reaction to the fair was again very favourable and we expect it will be a similar size in 2012.


Similar size to next year then. The guru on the other thread has been making ridiculous claims for 2 years about the value of Masterpiece. I hope every does their own research and questions seriously the motives of this particular poster.

[orinocor] 31/3/2012 14:58

Well the Mallet results were out this week. The business continues to lose money. Loss of £800,000. It looks terminal. Top line profit yes but of course the guru on the other thread doesn't mention that's just because of a one off profit on the property lease.

[rainmaker] 31/3/2012 01:50

I've had a chance to look at the figures in detail. We already knew that Mallett would be more halving their £1.2mln annual rent bill for their new London showroom (£550k pa)by moving a few hundred yards to their new bigger premises at Ely House, 37 Dover Street, Mayfair.

However it should be remarked upon, that as the transfer /assignment of the lease was completed in February 2012 after Mallett's year end on 31 December 2011, so the £1.7mln received is not reflected in these accounts. So with net debt of £1.1mln, I expect the Company to have net cash once this is taken into consideration.The Company have a £2.5mln overdraft facility and are targetting cash neutrality in the medium term. Other highlights that I feel warrant a mention-

Stock for sale on consignment has increased to over £13mln, the last figure I remember was £8mln back in 2010. With some 14k sqm available v 9k sqm at their previous London showroom in New Bond Street I expect this figure to increase further.

We know that the decorative arts market is cyclical and the Company comments "The decorative arts market showed encouraging signs of recovery in 2011. Although this faltered in the last quarter of the year, we have a definite sense of excitement for 2012 at Mallett with the prospect of trading out of our fabulous new showroom at Ely House."

After exhibiting at FAAF in Hong Kong for the first time last October,Mallett took further steps to capitalise on the fast growing Chinese market(which overtook the US as the largest single market in gallery and auction sales) by hiring a Hong Kong based consultant to drive their marketing efforts in that region.The Chinese are large collectors in traditional.

I've previously referred to Mallett's 17% write down in the carrying value of their stock, worth £3.3mln. I've argued that investors should include this figure when assessing the long term value of this business and to expect an upward revaluation once their markets return to more typical trading conditions. It seems that this process may have already begun-Taken from the Report and Accounts

"A full independent valuation of our inventory was undertaken at the year end, as an update to the independent valuation that was undertaken three years ago. This resulted in a net write back of previously made provisions of GBP0.3m and a total valuation significantly in excess of the inventory value held in the balance sheet."

regards

[rainmaker] 30/3/2012 12:29

Absolutely.Using Mallett's own figures for their share of the Masterpiece exhibition that the fair made a £362k profit.According to the Antiques Gazette, the number of exhibitors is set to rise to 166 from 152 this year.

regards

[playful] 30/3/2012 07:31

Profit before tax of GBP0.5m

Great future growth here!

[rainmaker] 26/3/2012 17:22

Mallett(MAE) currently 77p/82p results for the twelve months to 31 Dec 2011 should be released this week(last year 27/12/2011). Hopefully trading will have improved as the inevitable cyclical upturn in Mallett's decorative arts market finally arrives.In October last year they exhibited in the Far East for the first time and hopefully this will prove to be a gateway into the very lucrative Chinese market.

However the problem for Mallett over the last four years hasn't been a stock shortage but rather poor demand which hasn't really recovered from the financial crisis in Autumn 2008.

Once the decorative arts market recovers then expect not just an increase in turnover and prices but also prices.In 2009 Mallett wrote down the value of their stock by £3.3mln but expect an upward revaluation once market conditions to more normal levels of activity.It's true that there is less supply coming onto the market as the auctions of the contents of Country House sales have greatly diminished over recent years(CEO says two a year v 2 a month some twenty years ago)but that should make Mallett's stock even more collectible/valuable as most pieces are now in the hands of museums or private collectors.

Mallett have taken the deliberate decision to exploit this situation at the very top end of market(in 2010 they sold two pieces for +£1mln)by targetting exceptionally fine pieces. Major "top end" competitors Partridge Fine Arts and John Hobbs both disappeared in 2009 so expect them to significantly increase both market share and margins.Hoever IMHO this will only became apparent once the market recovers.


regards

[rainmaker] 12/3/2012 13:59

Enjoyed watching the market makers in Mallett this morning-

closed 77p bid 80p offered last night so 78.5p mid. A purchase at 79.25p and the MM change the spread to 75p bid 80p offered so 77.5p mid -1 and down 1p to the unitiated although only one purchase.

A further purchase 25k purchase at 83p and the MM change the spread to 75p bid and 82p offered so 78.5p mid and unchanged.

regards

[rainmaker] 12/3/2012 12:52

Re Mallett(MAE)-75p bid/82p offered-Looks like there is another (new) large Buyer entering the fray-No official announcement for the 1.3% bought last week so therefore buyer must be below the 3% notification threshold.Since there has been no announcement that a holder has reduced their stake this means that the freefloat(in the sense of the available stock not held by the six largest shareholders who hold +70% )is rapidly diminishing with possible dramatic implications for the share price ie. a squeeze.This morning a buyer has paid 83p for nearly £25s worth.

regards

[rainmaker] 08/3/2012 12:15

Not sure what happened to the RNS for tuesday, 6 March purchase of 180k at 78.5p.With 13.8mln shares that's 1.3%.Theoretically the trade could be reported tomorrow but there is the possibility that there is another large buyer around. Certainly it's going to exacerbate the shortage of freely available stock ie that not held by the six largest shareholders who have around 70/74%. Seeking greater clarification on this matter.

regards

[rainmaker] 07/3/2012 14:19

Thanks Playful.Good article from the Yorkshire Post.I think the undervaluation in Mallett is hard to miss.I estimate the liquidation value to be 171p a share which is more than twice the current share price.However as a going concern under normal business conditions it's worth more.Mallett own a 23.75% stake in one of the worlds premier international art and antiques fairs and this,let alone a recovery in their cyclical antiques business, is in the share price for nothing. Surprised that someone like the Telegraph's Questor column hasn't picked this up.

regards

[playful] 07/3/2012 10:01

Just stumbled across a good interview with PG from last year in the Yorkshire Post:


Whilst he doesn't mention Mallett it gives reassurance that RM is not the only savvy investor who sees value in Mallett

[rainmaker] 07/3/2012 00:48

Re Mallett(MAE), closed 77p/80p today-Looks like Swedish Activist Value Investor,Peter Gyllenhammar may well have increased his stake in Antiques Dealer,Mallett(MAE) even further, to approx 26.80% from 25.5% previously-see three trades today of 80k each.

So he's effectively applying a squeeze as something like 74% of shares are held by six major shareholders.(I note one Investor had to pay a 7% premium over the mid price to get a modest £6ks worth) So IMHO it's money well invested as a comparatively small investment would have a dramatic effect on the value of his holding.As he has done on numerous occasions,expect PG to take his holding to just under 30% but this technical, rather than fundamental, factor could really cause the Mallett(MAE)share price to fly, particularly if we get some positive news about an upturn in the decorative arts market later this month when Mallett release their results, for the twelve months to 31 December 2011.

regards

[rainmaker] 29/2/2012 00:16

Rainmaker - 28 Feb'12 - 01:49 - 3284 of 3284 edit


As I've said before, IMHO I believe Broker estimates for Mallett for the current year at 2.23p are far too low.There is a rent free period for the first year of their new address at Ely House,37 Dover Street, Mayfair,London from November 2011. Furthermore the one Broker producing estimates have not updated this forecast since Masterpiece exhibition stand figures became known-they are increasing capacity from 152 to around 166.(see previous article on this thread from the Antiques Gazette)

With a profit for the exhibition of £270k last year and presumably psm costs again increasing by 11%(as in 2010 to 2011)the Exhibition's huge operating leverage comes into force ie as the vast majority of it's costs are fixed profits are extremely sensitive to small changes in turnover.

2013 estimates are 6.78p or £0.94mln net income which equates to a share price of between 135p and 203p using the earnings multiples in 2006 and 2007 of 20 to 30 times when Mallett last made a profit. Due to the highly cash generative nature of the business,being a service industry with no or very little capital expenditure Mallett tends to trade on a high multiple of earnings.

All IMHO, DYOR etc
regards

[rainmaker] 29/2/2012 00:16

Rainmaker - 28 Feb'12 - 01:27 - 3283 of 3284 edit


Looking forward to antiques dealer,Mallett's(MAE)final results, for the 12 months to 31 December 2011 which I expect to be released at the end of March.There's a potentially very lucrative customer base for them in the Far East and the Company took the first steps towards exploiting that market in October, exhibiting at the Fine Antiques and Arts Fair in Hong Kong for the first time.


The demise of major competiton,Partridge Fine Arts(previously located next door but one)and John Hobbs in 2009 at the very top end of the decorative market is an added bonus. Obviously there isn't the supply coming onto the market there once was, with the Country House clearances sales having all but dried up. In 2009, in the aftermath of the banking crisis,Mallet wrote down the value of their stock by 17% or £3.3mln but with an ever dwindling supply of available stock on the market it's going to interesting to see when they reverse that decision. Certainly a recovery in the decorative arts market will mean not just greater business but also the rising value of their own stock.

Meanwhile Mallett have taken a conscious decision to concentrate on exceptional pieces and both margins and market share, should definitely increase as a direct result of a significant reduction in competition.In 2010 Mallett sold two individual pieces for over £1mln.The West End may be awash with Antique Dealers but how many of them are at this sort of level?

The trading performance of Meta, Mallett's modern art division should make interesting reading. In the first six months of 2011 they made £199k operating profit on sales of just £362k.

It's going to interesting to read their comments over the last twelve months and it appears that there are tentative signs of an upturn in business-


19 May 2011

Interim Management Statement

"Trading in the first quarter of the year was encouraging with more enquiries from clients and a greater level of energy in the market than last year. This included a good number of sales at both the American International Fine Art Fair in Palm Beach in February and at the European Fine Art Fair in Maastricht at the end of March. The second quarter has started much quieter so that, year to date, we are ahead of last year but behind management expectations."

interim results-11 August 2011

"However, sales have been at a much more consistent level month on month in 2011, except for April which was affected by a number of public holidays, than in 2010 when excellent trading in June offset some low sales in the previous five months. It is hoped this consistency of monthly sales is a sign of some confidence returning to the decorative arts market."


interim management statement 17 November 2011

"Energy levels have been slow to return to the market since the summer holidays, following the encouraging activity we experienced during the middle part of the year. However, our year-to-date trading results are currently ahead of last year's and are in line with management expectations."

regards