Mallett Share Discussion Threads

[rainmaker] 18/2/2013 20:57

IMHO it's going to do the share price no end of good.

regards

[rainmaker] 18/2/2013 20:53

Excellent find, Playful. what strikes a particular chord with me is the last paragraph, about an ownerless model. The directors are all well renumerated and have no real risk-check their shareholdings and you will discover there're minimal so it seems they're just along for the ride, to repeat a phrase I've said before, they're running rather than driving the business forward.They've discussed the strength of the Mallett brand and opportunities to extend it into other areas eg on line auctions but there's been nothing. It's true that Mallett have an unrivalled reputation as the worlds largest antiques dealer but there're not capitalising on that and I feel there's a distinct air of complacency-a lack of real determination and vision. I think the directors have done a great job steering the business through a difficult times over the last four years but whether they are the right people to lead the business forward is another matter and one area where I have a major concern.


"With its superb reputation, skills and infrastructure, there is substantial potential for Mallett to grow in the $46bn arts and antiques market," Mr Gyllenhammar said.

"In order for the company to capture some of its potential, I strongly believe that its drive must come from directors who represent true ownership of the company – not just well-paid non-executives with no real risk.

"Such ownership drive is what builds small companies to being bigger and more profitable. The ownerless model was tried in the Soviet Union for many decades, and we all know how that worked out."

Mr Gyllenhammar has an impressive record, and has generated good returns investing in companies such as Cape and 21st Century.

regards

[playful] 18/2/2013 20:20

Peter Gyllenhammar is preparing to overhaul Mallett, the 148-year-old London antiques dealer.

[rainmaker] 16/2/2013 17:03

Just a simple post about intrinsic value and the Ben Graham margin of safety concept using Mallett to illustrate.

The Company has net working capital ie current or liquid assets less all liabilities of £10.6mln. It has some £12mln of stocks which are valued at cost or net realisable value.There was a large writedown in value of over £3mln in 2009 should their market continue to recover then I would expect an upward revaluation.

However it owns the freehold of 49 Clapham High Street (which has been earmarked for sale) which it purchased in 2009 for £1.9mln and the esimates I have seen value it at between £2mln to £2.5mln.

Mallett also own a 23.75% stake in the successful annual Masterpiece exhibition and adjusting 2011 profits for a 28% increase in profits in 2012, then applying a 23% tax rate and giving it an earnings multiple of 10 you arrive at a value for the business of £5.6mln and Mallett's stake £1.33mln.However given it's favourable attributes(see next post) that make it a great business I would very conservatively value it at a fire sale £2mln.


So taking net working capital of £10.6mln or 77p a share and adding conservatively adding just £2mln for it's Clapham property and a further £2mln for it's stake in Masterpiece we arrive at intrinsic value of £14.6mln or 106p a share.Mallett which broke even in the first half of 2012 is predicted to have made a £400k loss for the year(but predicted to make a profit in the current year) so we can deduct a further £400k from the intrinsic value to get £14.2mln or 103p a share.

Mallett's current market capitalisation is £8.9mln, just 62% of that conservative intrinsic value or a 38% margin of safety however this calculation gives absolutely no value to Mallett business which can be considered to be in the current share price at no cost. Looking at the company's operating and trading history eg profit/turnover chart, changes within the industry ie the demise of two major competitors , annual cost savings ie the relocation of the London showroom and other cost saving measures etc,etc,etc I believe the actual business should make £1mln net income profit under normal mid cycle market conditions which I would use to value it at a conservative no growth 10 times earnings to give a value of 72p a share. So on that basis you could either conclude that the value of the business is in the share for nothing or alternatively that their Clapham Property and their stake in Masterpiece and more is in the current share price at no cost.

AIMHO, DYOR

regards

Rainmaker 16 Feb'13 - 16:43 - 4341 of 4342 edit

Not all businesses are created equal


A post about the annual Masterpiece exhibition mentioned in the previous post and the factors that make it a great business-


Business Franchise/Tollgate Business. Masterpiece is the largest arts and antiques exhibition-effectively they have no competition so they are free to raise stand prices over and above the inflation rate while growing stand numbers each year,giving the business an expanding value. I also consider this to be a "Toll Gate" business where serious dealers have to attend or their business will suffer so in other words they have to pay the toll.Aside from their Clients expecting to see them attend, there are also lucrative trading opportunities with other dealers.



Negative Conversion Cycle-some companies are fortunate that they only have to pay for products and services after they have sold their own. A obvious example is a newspaper publisher that collects payment for their products in advance of paying for paper and ink etc. Another example would be an insurance company that collects insurance premiums many months in advance of paying a claim. Masterpiece collects payment from exhibitors for stands many months ahead of the actual exhibition when the majority of costs are incurred. Therefore such Companies require very little in the way of working capital to generate their profits.Since these are cash businesses there no bad debt risk.

Service Industry-self explanatory, obviously the Company doesn't need to spend and tie up money in inventory and there is no risk of stock writedowns.Furthermore there is nothing in the way of capital expenditure on Factories,plant and machinery or transportation costs.Materpiece operate from an office rented from Mallett.

High operational gearing-since the exhibition's costs are of the fixed variety, the Company's profits are very sensitive to increases in turnover since once their costs are covered then additional sales are pure profit.

Scalability-basically this means that there is major investment required to increase turnover and profits and that the cost of incremental(ie additional) sales falls.The marquee used unravels to accommodate more stands and the rental cost of the site at the South Garden at Chelsea hospital is fixed.

I've probably forgotten a few other advantages the business possesses but make no mistake, if run well, this is an excellent business with huge potential for profit.


AIMHO, DYOR

[rainmaker] 16/2/2013 00:01

Hi Playful-everyone has lost patience.Complacency is a word that immediately springs to mind with Mallett I think shareholders also want a more dynamic,innovative and fleet footed management to drive rather just manage this business.How long did it take them to relocate to their current address and halve their annual rent bill for their London showroom?Then there's the planned sale of 49 Clapham High Road but the property isn't being advertised.Almost three years and even allowing for a haitus in the proposed sale this is too long a wait since throughout the recession rents in New Bond Street kept climbing.They acknowledge the strength of the Mallett brand and opportunities to extend it into related areas(on line auctions?) but there's been nothing.


Mind you, I think this has to be an excellent entry point for private investors if you believe that PG will be voted onto the board and start unlocking hidden shareholder value.

AIMHO, DYOR

regards

[playful] 15/2/2013 23:31

The sooner the better in my view

[orinocor] 14/2/2013 23:41

Partridge Fine Arts were a strong brand and that didn't save them. This whole business is going online.

[rainmaker] 14/2/2013 16:16

Guys,he's going to be get a seat on the board, surely

regards

[spob] 14/2/2013 11:42

time to play asset strip poker :)

[playful] 14/2/2013 11:35

P.G has my support

[spob] 14/2/2013 11:21

Get Peter on the board

good idea

[rainmaker] 14/2/2013 11:01

About time too and I will be voting a big yes and I would encourage others to do the same-


TIDMMAE
RNS Number : 8925X
Mallett PLC
14 February 2013
Mallett PLC
Receipt of Requisition for General Meeting
Mallett PLC ("Mallett" or the "Company") announces that it has received a notice from Chase Nominees Limited requisitioning a General Meeting of the Company to consider resolutions to appoint Mr Peter Gyllenhammar as a director and to remove any directors appointed to the Board after the date of the requisition notice.
The Board believes the proposed resolutions are not in the best interests of the Company and intends to recommend to shareholders that they vote them down. The Board will send out a notice of a General Meeting as required by the requisition notice in due course in accordance with the Companies Act 2006.
For further information please contact:
Giles Hutchinson Smith, Chief Executive 020 7499 7411
Michael Smyth-Osbourne, Finance Director 020 7499 7411 This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCSFWFSLFDSELE

[baner] 11/2/2013 17:23

the real problem here is the board and management - the market they operate in is a $46bn market, they have a fantastically strong brand and the most amazing premises to operate from - and yet they manage to lose money. there are no excuses for the board and its management team - they should just be replaced with real business people - as simple as that.

[baner] 11/2/2013 17:23

the real problem here is the board and management - the market they operate in is a $46bn market, they have a fantastically strong brand and the most amazing premises to operate from - and yet they manage to lose money. there are no excuses for the board and its management team - they should just be replaced with real business people - as simple as that.

[orinocor] 10/2/2013 10:47

These broker forecast are from the house broker who tend to be optimistic. Even if they are right Mallet won't even make up last years losses this year since a 2.39 profit won't offset a 2.55p loss.

Rainmaker now says Masterpiece are still advertising for vendors for this year. That doesn't look good. The real question is do the vendors make money because if they don't then Masterpiece is worthless in the long run.

[orinocor] 05/2/2013 11:51

Investors Chronicle said SELL last week so my 30p price target stands. That is a PE ratio of 12.5 for next year. I think Mallet might have to write down the value of their stock at some point. No dividend income for the forseeable, big spread and very illiquid shares. Investors have to take these factors into account.

Sorry if people have been sucked into this serial disappointer. The ramping elsewhere has not helped at all.

[orinocor] 05/2/2013 11:44

Rainmaker
31 Jan'13 - 01:19 - 4202 of 4224 0 0

Mallett forecasts


Forecasts
Year Ending Profit (£m) EPS P/E PEG EPS Grth. Div Yield
31-Dec-12 (0.35) (2.55)p n/a n/a n/a n/a 0.0%
31-Dec-13 0.33 2.39p 26.8 n/a n/a n/a 0.0%
31-Dec-14 0.82 5.96p 10.7 0.1 +150% n/a 0.0%

[baner] 28/1/2013 16:27

inventory is not held at cost. they have made significant provisions in the past, due to bad purchasing (management retained though)! in 2011 accounts they claim independent valuation confirm significant surplus value in stock. reason for large drop is likely to be appalling performance reflecting inefficient management and too high costs.with executives controlling the board and a chairman with 0 shares in the company, this is by no means a surprise. clearly heavy responsibility lies on major shareholder Troy/Weinstock and Gillenhammer. what are they waiting for?

[rangers99] 28/1/2013 15:55

hi
Is anyone aware the reason for the rather large drop today. One question that Id like to ask is about the inventory. Is it held at cost?
TIA

[orinocor] 21/1/2013 07:39

I think masterpiece is worth £0.5M max since it has only made 2 years profits in its history and profits could easily just as soon vanish this year or next. No track record.

Mallet still losing money and not paying a dividend either. Rememeber cash flow neutrality is the medium term target. That's as exciting as it gets. Its not even priced at a big discount to its net asset value. A normal investment trust like SDV which pays 6% yield and is at a discount to its nav is a far more rewarding investment to my eyes.

[orinocor] 15/1/2013 21:12

Rainmaker
11 Jan'13 - 14:51 - 4114 of 4124 0 0

I personally believe that £44mln is too rich for Masterpiece.However given the great dynamics of the business, I would value at around 4 times annual turnover to give a price tag around £30mln.

If anyone has a spare £30M why not spend it on 1 week auction fair in central London. It will only take you 60 years to get your money back. Ludicrous

[orinocor] 11/1/2013 18:33

lol Snatander, at a mere 30K I can't believe its not been snapped up. I checked ebay, there's a Victorian magazine rack on there at starting price £165



When Mallet were in Bond Street there was always the chance that a rich Oligarch or Arab would pop in off the street and pay silly prices for stuff. Now they are much less visible that type of business has gone and it will be a more discerning buyer, someone who has done their homework.

[snatander] 09/1/2013 15:42

nobody tempted by the magazine rack? snip at 30k, you can look at the sothebys archives and they usually sell for 2k

are these guys crazy or what

[snatander] 12/12/2012 23:25

magazine stand 30k