Mallett Share Discussion Threads

[playful] 18/9/2012 22:22

I suspect Mr Chairman will get his marching orders in the not too distant...

[baner] 14/9/2012 10:03

orinicor

whilst i agree with your view on the Masterpiece valuation - a PER of 10 is more appropriate and would lead to maybe £1m for Mallett´s stake - i do not at all share your view re "inflated valuation" - on what basis have you come to that conclusion? there is a LOT of assets in this company - they now even state there is a surplus in the stock and possibly Clapham will generate a profit too. and the brand is of course potentially very valuable - however the problem here is the lack of entrepreneurship at the board/management level. which is what you get when you have a chairman with 0 shares in the company - really strange that Weinstock and Gillenhammar allows this to continue!

[orinocor] 13/9/2012 13:09

inflated valuation imo. I'm a buyer at 30p

[rainmaker] 13/9/2012 13:02

Of course if you buy £10.5mln market cap Mallett(MAE) at current prices, 73p bid, 79p offered, you pay absolutely nothing for it's fixed assets ie they own the freehold of a Property at 49 Clapham High Street, Clapham, London worth £2mln, maybe as much as £2.5mln which is currently occupied by their antique and art restoration business Hatfields-expect them to move "in-house" once sold.The business has already been earmarked for sale once they can realise an appropriate value.

However not only do you get all Mallett's tangible fixed assets for nothing at current prices but you also gain their intangible fixed assets free of charge.Intangible fixed assets are usually brands, copyrights, patents, distribution agreements.

However I would definitely consider their investment in Masterpiece as an intellectual Property and the value of their stake in this business to be in the current Mallett share price for nothing since the business employs very little in the way of tangible fixed assets.It's a great business with a bright future hence start up costs have been almost repaid within three years.

Mallett's have already leveraged their relevant intangible assets to make this business a success ie it's knowledge base,archive history, reputation,trading relationships amongst other dealers. Clearly the Masterpiece business, not to mention the brand, is valuable one with a trading profit of £571k on sales £5.6mln in 2011(the business already has decent margins but these will increase as the Co's scalability and operating leverage become more apparent as the business expands).

regards

[rainmaker] 30/8/2012 09:56

That's very true Playful-you just need to be both willing and able to exercise extreme patience.I've been looking for evidence that 49 Clapham High Street, Clapham which Mallett bought at the top of the market for £1.9mln in 2007 is being offered for sale. It's Mallett intention that it is to be sold. Let's hope it doesn't take two and a half years!

I saw a valuation for this address on a property site, Zoopla? I think where they gave a valuation with a high degree of certainty but I can't remember the amount-£2.2mln?I'm going to revisit and check.

regards

[playful] 29/8/2012 22:16

Thankfully this is a business I never lose sleep about!

You can certainly take confidence in the stewardship of this company now P.G has a strong influence on their management team.

[rainmaker] 19/8/2012 21:02

For anyone wondering what I was talking with the phrase "toll gate", an explanation. Many years ago in the UK ,there were privately owned roads and bridges and quite simply, if you had to use then you had to pay the fee at the tollgate. Of course you didn't have any choice in the matter so the Owner would charge whatever he liked at the toolgage or entrance . Warren Buffett refers to tollgate businesses that the Customer has to use the product or service regardless of the cost charged.Such businesses have not just the option to set their own prices but also raise them at above the inflation therefore giving the business an "expanding value"(providing costs can be keep to the inflation rate or less)

I seriously see Masterpiece as such a business where dealers have to participate and pay the tollgate. You look at what Mallett achieved at this year's exhibition-the most successful for them of any exhibition they've participated in for more than a decade. If you're a rival of theirs, can you afford not to attend...............obviously not.

regards

[rainmaker] 17/8/2012 11:37

IMHO Mallett should go to at least 112p,36% above current prices,it's tangible net asset value since it's clear that it will be making a return above it's cost of capital.

regards

[rainmaker] 17/8/2012 11:23

It lives! Mallett has just sprung into life, going 80p bid.Maybe the penny has finally dropped re Masterpiece and Investors concluding the following after this year's exhibition which was the most successful one in more than a decade -

1)Mallett main decorative arts business has finally started it's cyclical upturn.

2)Masterpiece is a value business franchise whose value isn't in the Mallett share price.

3)Dealers can't afford not to exhibit at Masterpiece so it's like a tollgate business so the exhibition can continue to raise stand prices at 11% pa whilst adding exhibitors-there's a waiting list of 150 so it's quite conceivable that they could add a further 30 or stands for 2013 which would have a dramatic effect on it's profitability given it's large operating leverage.

DYOR etc
regards

regards

[rainmaker] 12/8/2012 13:15

regards





Shanklin 12 Aug'12 - 07:45 - 3640 of 3641 (premium)


RM

So, do you think the profit quoted by MAE for the Masterpiece event only covers the first half the fair or, perhaps, more materially, the second half of the fair will have provided a major boost to MAE's sales for the year?

BTW, slightly O/T, I don't yet have shares in MAE or FCCN but would be much more comfortable holding MAE.

Cheers, Martin

Yes definitely Martin, as the fair ran from 27 June to 3 July and Mallett's recently releases interim results cover the six months from 1 January 2012 to 30 June 2012.However I have no way of knowing whether the majority of sales fell in the first or second half of the fair or whether they were evenly split.

However what I can say, without fear of contradiction, is that the value of their 23.75% stake in the Masterpiece exhibition is in the current Mallett share price for nothing since the fair employs very little in the way of fixed assets and Mallett trades at less than net working capital.Last year the fair made an operating profit of £517k on sales of £5.3mln(I have a copy of the accounts for the year ending 30/9/2011)This year the fair will have made a profit of circa £666k.Value the business in line with the average rating list Companies of twice annual sales then their stake is worth £2.5mln v current Mallett market cap of £11mln, based on last years sales but for a number of factors already mentioned, Masterpiece is not your average company and therefore demands a much higher rating.

If Masterpiece have a waiting list for stands of 150(a quote attributed to their chairman and also stated in The Economist) then it's very clear that they are able to dramatically increase the size of next year's fair from 166-170 this year to +200. However due to the effect of large operating leverage next year's profits won't be 200/166 x 666k=£802k but significantly larger.

IMHO,with the sharp recovery in their decorative arts business already evidenced,the next stop for Mallett share price should be +112p some 37% higher than the current share price.112p is the Company's net asset value(it should also be noted their tangible net asset value)since Mallett will be making a return in excesss of their cost of capital(however you want to measure it, WACC etc). I'm looking for the Mallett share price to hit at least 250p over the next 16 months.

Looking at a list of identified Value share multi baggers over recent years, I'll try to post it today, they generally have one thing in common that they're all strong business franchises. Occassionally you get the opportunity to buy such a business in a cyclical downturn at rock bottom prices but you need to exercise extreme patience whilst you wait for their market to recover.Mallett as the supposedly the worlds largest antiques dealer is one such business and with the demise of their main competitors in recent years that business franchise has become a lot stronger.With the recovery in their markets expect a dramatic rerating since at the current share price you don't pay for any profit let alone growth.

I might have been a long way ahead of the curve with this Company but surely the Investors Chronicle have been a long way behind it.

regards

[rainmaker] 12/8/2012 00:41

Wow,here's a cracking piece from Art Daily which says "Mallett,one of the world's leading antiques dealers, achieved its best sales at a fair for more than a decade at Masterpiece"Note that only the first half(ie first three days) of the fair fell in the interim results.

Although I have absolutely no doubt that Mallett's 23.75% stake in this exhibition is very valuable, the founder and former Mallett MD, Thomas Woodham-Smith said words to the effect that Masterpiece was founded with the aim to rejuvenate London's reputation as one of the major arts and antiques centres.



Some other reports-






In effect, what Mallett are saying it that the Masterpiece's novel multi disciplinary approach of showcasing the "best of the best" from around the world and combining this with finest eating and drinking establishments is already fully vindicated

regards

[rainmaker] 12/8/2012 00:31

Thanks very Spob-glad to see you're still holding. As you'll know,I've been wildly bullish about this Company for almost the last couple of years in which time, the share price has risen at a compound rate of a respectable, if unspectacular 13% a year but I'm convinced the Mallett share price performance over the next couple of years will dwarf that figure and make it look very pedestrian.

Re Investors Chronicle piece-still no mention of Masterpiece-when are they going to realise it's a very valuable business or the Property they own at 49 Clapham High Street, Clapham which is to be sold . I believe it's in their books for £2mln but it was definitely bought for £1.9mln in 2007.


regards

[spob] 10/8/2012 20:58

Mallett delivers vintage performance

from the Investors Chronicle

The latest results from Mallett confirm that better times may be ahead for the antique dealer as losses are almost eliminated. Note, however, that Mallett also warns that fragile financial markets are likely to continue to restrain investor demand.

Both the UK and US antique operations performed strongly in the six months to end-June thanks to the sale of more expensive objects. In the UK, the major sale was a pair of George I gilt gesso armchairs made for the 1st Duke of Chandos. At the same time, a showroom move saved £200,000 in rent and provided the company with a magnificent Mayfair town house to hang mega chandeliers and display other large items of furniture. It's also a showcase for vendors to sell their furniture and so avoid gobsmacking auction fees. Mallett's other antique interests produced mixed trading results.

To drum up business, Mallett is increasing its contacts in the Far East and Brazil and emerging markets will become increasingly important in time. For the full year, broker Singer is sticking with its estimate of sales of £13.3m, adjusted pre-tax profits of £200,000 and EPS of 1.7p. For 2013, profits are forecast to quadruple to £0.8m on sales of £14.1m to deliver EPS of 5.9p.


MALLETT (MAE)
ORD PRICE: 81p MARKET VALUE: £11.2m
TOUCH: 78-84p 12-MONTH HIGH: 81p LOW: 64p
DIVIDEND YIELD: nil PE RATIO: 14
NET ASSET VALUE: 111p NET CASH: £620,000



Half-year to 30 Jun Turnover (£m) Pre-tax profit (£000) Earnings per share (p) Dividend per share (p)
2011 6.43 -280 -1.97 nil
2012 6.94 -16 0.31 nil
% change +8 - - -



IC VIEW

Mallett is a steady recovery play and one with a solid cash-rich balance sheet; inventories of £11.6m are worth more than the company's market capitalisation. Mallett was one of Simon Thompson's 2012 Bargain shares at 72.5p and, trading 25 per cent below book value, they are well worth buying.

Last IC view: Buy, 72.5p, 10 Feb 2012

[rainmaker] 09/8/2012 13:52

Very true Playful,with these results-see turnover up 19% in the six months to 30 June 2012 despite a slow start to the year ,I think we can safely conclude that the cyclical upturn in Mallett's main decorative arts business has finally arrived.I also liked the 29% rise in profits at Masterpiece where according to a source quoting the Chairman, there's a waiting list of 150 for exhibitor stands-we had 112 in 2010,152 in 2011 and 166/170 this year but could we see a much enlarged exibition in 2013?-we should know around December time if not sooner. Remember this business has large operational gearing eg this year a 29% increase in profits yet turnover up considerably less.

regards

[playful] 09/8/2012 07:48

Steady progress being made here which is a big positive given the state of the UK economy.

[orinocor] 09/8/2012 07:34

results out and NAV down again.

Shareholders' equity at 30th June 2012 was £15.2m (31st December 2011 - £15.4m) which represents a reduction of £0.2m since the start of the year. This is due to actuarial losses of £0.1m and foreign exchange losses of £0.1m.

How did Masterpiece get on?

We expect the fair to be profitable again this year and have estimated Mallett's share of the profit for the six months to 30th June 2012 to be £83,000 (2011 - £64,000).

Remember Rainmaker thinks Mallets 23.75% stake is worth £7M. You'd have to be on crack, speed and crsytal meth to put Masterpiece on a PE of 100. Its obvious that if the revenues start to drop any profit will be wiped out altogether

[rainmaker] 04/8/2012 15:54

I think Mallett's interim results will be released next week.Looking for a profitable first half since on the evidence of feedback from auctions houses and exhibitions,is that their main decorative arts business, in particular antique furniture is enjoying a revival. It's also going to be interesting to discover whether there has been a significant increase in business from China, now the worlds largest market but I note that the auction house, Christie's recorded a 31% increase in Asians registering to bid at their auctions in the first three months of the year.

I'd like to see a 1p dividend with their results of the cost of which would be £138,000.Broadly speaking, expect a profitable first half to positively impact upon the share price. With the receipt of the £1.7mln from the sale of their New Bond Street lease they now have net cash. Other news to look out for is news of the planned sale of 49 Clapham High Street which they paid £1.9mln for in 2007, the profitability of Masterpiece and visitor numbers for this year's event.

With 40% vote against the Directors renumeration report at this years AGM,I think the patience of shareholders is wearing thin which together with the Company's net cash position will mean that we do get a dividend but we will see.

regards

[rainmaker] 26/7/2012 19:46

Baner-Things get a little more interesting at Mallett(MAE)unchanged at 78p/82p as someone bought 1mln shares today in two batchs of 500k each-although I suspect that's a duplication ie there was a single purchase of 500k. If it's Peter Gyllenhammar then he goes over 30% and is forced to make an offer for the whole Company.

If it's a duplication, as I suspect, then by my calculation he's over 29% but under 30% and breathing down the boards of directors necks to remind them that since they don't really own any shares, the shareholders own the Company. However the board do potentially have up to 675k shares through various incentive plans.

I have to say I think it's PG and hopefully there will be a RNS tomorrow.Since he'll be reading this, I'd better make sure I've spelt his name correctly!

regards



A nice picture of Peter Gyllenhammar, looking not dissimiliar to Inspector Derrick
below.

[rainmaker] 26/7/2012 01:08

Just some thoughts on Mallett(MAE) ahead of their interim results for the six months to 30 June 2012, expected in the next 2 to 3 weeks. Last year released on 11 August 2012.

Mallett made a £500k profit last year. However there was an exceptional profit of £1.3mln for the sale of the New Bond Street lease. This money was received after the year end so adjusting those (year end)figures would give Mallett net working capital of 88p .Excluding the exceptional profit, Mallett made an underlying loss of £800k.However in applying that loss to the performance in the current year, you need to take into account a rent free year at their new address from 1 November 2011 and Mallett assigning their lease at the old address to Fendi on 28 February this year so-

Rent for New Bond Street address is £1.2mln per annum so £100k per month

Rent for new address in Dover Street is less than half of New Bond Street so for convenience sake, say £600k per annum or £50k per month

so rent for current year is £200k for Jan and Feb at New Bond Street plus November and December at Dover Street so £100k. Therefore total rent payable for current year is £300k against £1.2mln last year, a saving of £900k so with no improvement in trade Mallett make £100k. However they stated in their last trading statement for the period 1 Jaunary 2012 to 17 May 2012 that trading had been ahead of expectations.A single Broker estimate for the current year is £230k net income or 1.7p and for year to 31 December 2013, £0.81mln or 5.9p.

Obvious points to look out for in the interims, is a profit in the first half with a reasonable pick up in trading and outlook-a token 1p interim would cost Mallett £133k, I would expect a 1p dividend particularly if covered by profits.

News of the sale of Hatfields restoration business headquarters at 49 Clapham High Street worth £2mln+ being put up for sale. The decision to sell this freehold, acquired by Mallett for 1.9mln in 2007, has already been made once the full price has been achieved. I have checked and this address hasn't yet been advertised for sale.

News of visitor number for Masterpiece 2012 and it's profitability+any news on plans to expand the exhibitor stand numbers from 166 this year to maybe 200 in 2013.

News of modern art division, Meta which made an extraordinary £199k profit on turnover of £362k in the first six months of 2011. It appears that this business output is practically presold rather sitting as stock in the showroom.

regards

[orinocor] 18/7/2012 09:53

Lets remind ourselves of the directors forecasts from the results.

We have renewed our £2.5m overdraft limit with Coutts & Co and we continue to target cash neutrality in the medium term.

That's about as good as its going to get for the next several years. Cash neutrality is the target! What does that say about the business just now! Not even cash neutral.

[rainmaker] 17/7/2012 13:35

Baner-I think Mallett and the antiques industry in this Country is maybe a good example of Investors superficial level 1 thinking v deeper, unconventional level 2 thinking. There was an interview with Thomas Woodham-Smith,ex MD of Mallett and the founder of Masterpiece in which he talked of the demise of the English Country House, the contents of which had been boxed up and shipped to America.From two auctions a month twenty years ago to maybe two a year now.He talked about the scarcity of furniture and quipped that some Dealers would end up owning a chair leg each since there would be such poor availability of stock.

I think the changes in the industry will suit Mallett.They operate at the top end and they've shifted their emphasis to buying exceptionally fine(expensive) pieces where they no longer have competition from Partridge Fine Arts and John Hobbs. Of course with less competition they have both greater bargaining power in the buying and selling of top end antiques. Furthermore if there is less availability then the stock they hold should increase in value.I note that they hold some £14mln of stock for sale on consignment so the situation isn't as dire as some would like us to think.

regards

[rainmaker] 16/7/2012 13:27

Thanks Baner, welcome back. I wholeheartedly agree with Ben Graham that rather than risk,returns are definitely related to amount of intelligent effort that Investors are both willing and able to bring to the task.

To my mind it's wasn't too hard to spot that Masterpiece was a valuable business franchise and this was confirmed when stand prices rose over 11% between 2010 and 2011.It's also easy to appreciate that Masterpiece is a terrific business, understanding the way it operates ie neglible investment in either fixed and current assets, a negative conversion cycle,high operational gearing, the scalability etc.Then there is absence of other negative factors that dog other businesses-ie stock obsolescence, credit risk etc I understand that the Partners have recouped the initial and subsequent investments made within three years which is reckoned to be proof of a "good business."

Thanks for the auction news. As you'll know Mallett's sales fell off a cliff with the credit crunch in Autumn 2008 with sales in the second half of that year dropping 43%. We're currently running with turnover at some £3/£4mln less than the pre credit crunch levels.Obviously trunover has since stabilised but we've yet to hear confirmation from the Company that they've recovered. I expect positive news on this within the next month with the release of the interim results. I note that fellow Masterpiece shareholder, Apter Fredericks reported just a couple of sales at the fayre worth £1mln so I'm very optimistic even if their marketing drive in China has yet to bear fruit.


IMHO a big rerating imminent. Adding back the £1.7mln they received for the sale of the New Bond Street lease, gives us net working capital of 90p a share and tangible net asset value of 123p a share.Mallett plan to sell the headquarters of their restoration business at 49 Clapham High Street once full value is realised.Property was purchased for £1.9mln in 2007.

regards

[baner] 14/7/2012 18:21

RAINMAKER

many thanks for your excellent research - much appreciated!

you were probably the first one recognizing the significant potential in the Masterpiece investment - well done!

recent auctions at christies/sotheby confirmed strong interest in up-market furniture and objects, and Mallett should now sit on a significant surplus value also in its inventories.

the problem with Mallett is that the managers have very little ownership/money at risk and seems to focus on milking the company for remuneration/options rather than build shareholder value. this situation becomes even more of a concern when you see that the chairman owns 0 shares in the company and the other NED has a ridiculously small investment. this is alarming, no doubt!

why are the major shareholders not represented at the board? have they not been invited by the current directors? i believe it is vitally important for a company like Mallett to have the owners represented at the board!

[rainmaker] 13/7/2012 12:16

Furniture has done well this year," said Apter. "We have seen three or four US clients with their interior designers." Apter-Fredericks had sold major furniture pieces to American buyers; these include the Houghton Hall red lacquer Bachelor's chest, around 1705, which had an asking price of £450,000. A pair of George III parquetry commodes attributed to Pierre Langlois, around 1770, was also bought by an American. "The asking price was in the region of £500,000," says Apter.