Stanley Gibbons Share Discussion Threads

[nick100] 26/1/2009 08:55

Stanley Gibbons chief has investment licked
Michael Hall, chief executive of stamp collecting group Stanley Gibbons, is getting rather defensive about his £10,000 a year habit.


By Josephine Moulds
Last Updated: 6:57AM GMT 26 Jan 2009

"If you were to tell any friends of mine from the past that I was a stamp collector, they would say you were mad. I was a cool kid at school."

So what exactly is he saying about stamp collectors?

"It is the stigma that is attached. Stamp collectors don't think they are uncool, that is just the general perception. They are normal people, surprisingly," he laughs.

"There is a human instinct to bring order where order doesn't exist. Starting with nothing, you are bringing things together from all over and putting them into one place, seeking out the ones that are hard to find. It's a strangely pleasurable experience."

Mr Hall, 38, started collecting only after joining Stanley Gibbons. Trained as a chartered accountant, he was recruited as finance director in 1999 and rose to chief executive within a few years.

From a share price of 11p, the Aim-listed business rose to a high of 250p in 2007. It has since dropped back down to the 100p mark, giving it a market capitalisation of around £26m.

Apparently Mr Hall is not alone in coming to this strange obsession later in life. A Stanley Gibbons survey suggests that 80pc of their customers did not collect as children. The severe lack of young collectors in the UK is made up for by a sweeping craze in emerging economies.

So the customer base is stable for a while at least. "Looking at 50 years from now, that is a big unknown," says Mr Hall. "I wouldn't want to quantify that in any market."

He enjoys philately both as a collector and an investor. "The whole plan is that, irrespective of what lousy business decisions I make that could result in me losing all my money, [my collections] remain. My intention is that they will become an inheritance for my children."

Stamp collecting as an alternative investment is a growing trend. Entrepreneurs and high net-worth individuals have swooped into the market, often pricing other collectors out. "They think they know everything and can beat the market. A lot of them regularly overpay for items, which is their own stupid, arrogant fault," says Mr Hall, a touch bitterly.

He dismisses comparisons with the art market, which has proved less resilient to the recession than was hoped.

"It is a completely different animal. Art is infinitely more expensive and therefore material. Stamp collecting is like a bug, which becomes an all-consuming passion. Stamp collectors are trying to achieve something, they are buying stamps to complete a collection. The drive and urge to complete that protects the market in difficult times.

"Obviously there are people that will spend less on stamps, but it's a small element of our total sales," he says.

Stanley Gibbons offers investment products that promise a guaranteed return of 3pc over three years, 4pc over five years and 5pc over 10 years, which has attracted considerable interest in this era of very low interest rates.

Despite a recent profits warning, which Mr Hall blamed on a technical issue, the company says these products will help it weather the downturn. Other stamp dealers, however, have raised concerns that they will fuel unsustainable price inflation, as the value of stamps tends to be based on their price in the Stanley Gibbons catalogue.

One dealer, who preferred to remain nameless, as he deals with Gibbons, says: "If you are putting out the catalogues as well as selling the stamps, you just jack the prices up to guarantee those returns."

Mr Hall argues that they would not raise prices beyond a level that customers would pay. But that is exactly what the dealer is worried about. He says: "If you are selling to collectors and the prices are too high, that's when the crash occurs."

Dealers say prices crashed in the early 1980s, after speculators ploughed into the market only to leave en masse a few years later. Mr Hall argues that the rarest stamps were protected. He produces data on a selection of 30 rare British stamps, the prices of which have never fallen on a yearly basis over the past 50 years, generating an average annual return of 10pc.

"It seems it never goes down in value. It is almost a perfect market," says Mr Hall, with a degree of confidence that might alarm experienced investors.

"I wouldn't believe it either. Our chair said we should promote the investment benefit. That's when I undertook the research, and that's when I started buying them myself."

Stanley Gibbons is also planning to launch a fund to invest in the "crème de la crème" of British stamps.

"At the top of the market, you have the real rarities, like the first ever envelope with a Penny Black on it. Those items, their prices are dictated by the fact that there is always someone richer than the last guy, that wants it more than the last guy."

Mr Hall says demand for the fund is there, but it has been delayed because the institutions due to launch and distribute it are "in such a mess".

It is planned to be between £5m and £10m in size. This has caused consternation among dealers. The investment universe for rare British stamps is small and a fund of that
size would distort prices. Hall says that the intention is to trade items throughout the fund's life.

Despite their concerns, dealers do recognise the potential to expand their customer base.

"There is a good investment market out there," said one.
"It's just got to be handled carefully. Otherwise we'll end up with the mess we had 25 years ago."

[orange1] 21/1/2009 07:42

Bit early in the morning .... I guess all sgi have to do is pay the deposit back and they get the stamps back. The unpaid balance remains unpaid and is just cancelled not paid back as it was never paid in the first place.

[masurenguy] 21/1/2009 07:42

The £3.4m in deferred sales were made on the basis of a 12 month buy back guarantee. Logically one would assume that the 10% deposits paid by the customers should be refundable if they decided not to proceed with their purchase within 12 months. Otherwise the Board would have included the 10% deposits - £340k - in the current year (as guaranteed revenue) and deferred the balance - £2.96m - into next year. However they have deferred the full amount - £3.4m - indicating that none of this is guaranteed, hence the prudent decision to defer the full value.

[rcturner2] 21/1/2009 07:31

I would have thought if the client does not pay then the deposit is lost and SGI get the stamps back?

[orange1] 21/1/2009 07:29

If the stamps were sold for GBP 3.4 million and the company buys them back, surely the company would pay GBP 3.4 million and not GBP 340k.

[madmick] 21/1/2009 00:23

"During the year, the Company entered into approximately GBP3.4 million in value
of sales transactions on extended credit terms to several key investment
clients. Since these sales were on terms including a 12 month buyback guarantee,
the Board has decided to defer both this revenue and the associated profit into
2009, when the guarantees will have expired."

So the clients have paid 10% = £340,000 that has gone into 2008 results.
If they pay the balance £3.060,000 in 2009 thats not bad to carry forward.

full 2006 £16,645,000
full 2007 £20,148,000
first 1/2 2008 £9,847,000 + 2nd half making Tot £20,148,000 (they expect)
So if the clients had paid bal. in 2008 that would have made it £23,208,000 full year .
a 15% increase over last years sales.
one can only think the markets are expecting clients not to pay balance, and SGI to have to fork out £340.000 to buy them back. not a big deal!
That would give a bad signal, suggesting the clients and future clients not buying. (and not just delaying payment)
As mentioned drop looks overdone.

[mryesyes] 21/1/2009 00:06

Looks like the obvious. Stamps is a collectors game when they have all other investment bases covered. They always do well in booms and get forgotten about in recessions if you go back and look
Whose on the lookout for top stamps when they just lost their job and 4/5ths of their wealth

[cockneyrebel] 20/1/2009 21:09

If these are going to do just 13.4p as last year instead of 17.4p forecast that says there's no growth.

If they haven't grown in the past year then a profit decline looks likely for the coming year. Say they do 11p eps. What sort of PE's are available in the market with 10% yields and growth? 4p divi here - 4% yield.

I bet you can find PE's of 6-7 with growth and 10% yields in the market today.

Doesn't make these look that cheap imo.

CR

[bookworm1] 20/1/2009 21:00

So by taking a very extremely prudent view of guaranteed sales (as they hold the asset until paid for) results are expected to be similar to last years which is a reduction now of 16% on EBITDA projected figures and a reduction of 35% on projected eps. Looks to me as if the share price fall has been overdone if one compares last years results and share price. I have said it before everyone seems to be throwing the kitchen sink in this year. At least by adopting such a prudent accounting standard no one can argue that the accounts are overstated or using similar dodgey accounting techniques that caused the banks to come unstuck.

[orchestralis] 20/1/2009 10:00

Might be! 4p div?

[cambium] 20/1/2009 09:50

good buying opp?

[thumbs] 20/1/2009 07:19

RNS Number : 9054L
Stanley Gibbons Group Limited
20 January 2009

?
For release at 7am on 20 January 2009


The Stanley Gibbons Group Limited
("Stanley Gibbons" or the "Company")


Trading Update


As it enters its close period, the Board of Stanley Gibbons wishes to provide an
update to the market on its expected results for the year ended 31 December 2008
and current trading.


2008 trading results


Overall, the results for the year are encouraging, demonstrating a continuing
high level of demand for the Company's investment products linked to the
underlying assets of stamps and collectibles. Whilst the reported outcome for
the year is likely to show turnover broadly in line with that reported in 2007,
the resulting profit before tax is now estimated to be below earlier market
expectations. However, due to a lower tax rate, earnings per share are expected
to be similar to 2007.


During the year, the Company entered into approximately GBP3.4 million in value
of sales transactions on extended credit terms to several key investment
clients. Since these sales were on terms including a 12 month buyback guarantee,
the Board has decided to defer both this revenue and the associated profit into
2009, when the guarantees will have expired.


The clients have paid a 10% cash deposit on these contracts and the Board does
not expect the guarantees to be called. The Board considers that the deferral
of the revenue into 2009 is prudent and in line with best market practice.


Proposed Dividend


The Company's balance sheet remains strong and is debt free despite an increased
investment during the year in its stockholding of scarce, high value
rarities. The Board intends to demonstrate its confidence in the outlook for the
business by recommending to Shareholders a final dividend similar to last year.


Current trading and outlook


Recent trading is showing a high level of demand for the Company's investment
products which are benefiting from the current low interest rate environment
making the returns from investing in collectibles more appealing. The current
weakness in the value of Sterling against most other major currencies presents
some exciting marketing opportunities to substantially grow sales
internationally to US Dollar and Euro based investors.


Consequently, the Directors remain confident in the long term growth potential
of the Company's businesses and in the ability for sales and profits to grow
again in 2009.


The market in rare stamps continues to be strong, evidenced by the high value of
realisations from recent auction sales.


Martin Bralsford, Non-Executive Chairman commented:


"I am more than satisfied with the Company's performance during 2008, a year of
challenging economic and financial conditions. More particularly, when
considering the 2008 results including the sales we are deferring into 2009,
underlying sales would show growth of over 10% year on year and profits would
also have shown an improvement at the same time as increasing revenue investment
in long term growth opportunities.


Based on current trading, our outlook for 2009 remains optimistic."

[bookworm1] 12/1/2009 19:09

Just checked the brokers forecasts since the last time I logged on and the eps has been revised down from 24p to 17.2p so it seems that the brokers are being very cautious by downrating revenues and earnings. I guess they are just throwing the kitchen sink in to be cautious so that when the actuals results are announced and are not as bad as everyone thinks they will look good. Its what I would do if I was in their position. But as far as I am concerned the basic business is sound and have not heard anything to suggest otherwise. My main interest is in how the BRIC countries are performing and the recruitment of their overseas agents to build up a global brand presence.

[davidwilkin] 07/1/2009 13:52

Pylewell, it had to go either 1 way or the other, stocks just cant sit still indefinitely, given EPS of 24p ish this year it wasnt going to go a lot lower.
You just need a bit of interest, remember all stocks of interest are on peoples monitors daily and theres no point in buying until theres some volume. Where too next ?? its worth £2 but it wont go there in a straight line.

[pylewell] 07/1/2009 12:56

Anyone any idea why we have had the sudden rise? Maybe it's due to the approaching finals. Last year was 14th March. Or has it been tipped somewhere?

[chairman2] 04/12/2008 17:27

Shell shocked in general but not by these

I suspect its wait and see given the prospect of more
banking armageddon around the crucial year end balance
sheet fixings.

[henryatkin] 04/12/2008 15:15

Everyone sold out? Bit quiet round here.

[davidwilkin] 19/11/2008 15:07

Bloody brilliant good find Tom - I'm overloaded with these but loathed to sell at this price despite everything else that i want to buy. Pity we cant tell the world about this.

[hywel] 19/11/2008 11:06

That is good news, Seymour Pierce raising its 2008 pre-tax profits forecast from £5 million to £5.5 million in this market has to be a great result.

[tom.muir] 19/11/2008 09:36

This is encouraging :

[wilmdav] 16/11/2008 12:03

Chairman, Robsy, bookworm et al,

Thanks to Robsy for posting the UK-Analyst article. I've never been keen on the 'guaranteed' marketing line, mainly on the grounds that it diminishes the brand image of SGI and partly because of the potential risk to the company. Furthermore I think the failure to declare the interest rate for what it is, says a great deal. But what worries most of all is the lanquage used in marketing articles and company news letters to promote these contracts and stamp investing generally. Chairman2 sums it nicely for me:

Where Robsys2 has a point is that the language used in the
marketing literature is off-putting to anyone with a serious
investment background. It is Naive and off-putting. It proabably
acts to reassure (overeseas) oligarchs and others new to
collecting but if you are trustee or fund manager the language
is literally incredible. SGI might be shooting themselves in
the foot by sounding like hucksters not sound money men.

CEO Mike Hall is a dynamic character who has been the driving force behind SGI's expansion in sales and profit over the past few years. But unfortunately the kind of language used in the article always emanates from him. With due respect to bookworm, I do not think it's clever at all. You don't have to be a city investor to be turned off by this kind of hype.

I could live with the guaranteed income products if they were marketed more responsibly. Here is an example taken from the IC website, dated 11 Nov.

More people collect stamps than anything else on earth: the rare stamp market is underpinned by a cool 48m collectors worldwide, including 18m and rising in China alone. So, as Adrian Roose of specialist dealer Stanley Gibbons says: "the market offers a low volatility and excellent liquidity".

The market is further helped by the fact that the ageing populations of the west are increasingly rediscovering their childhood hobbies. Stanley Gibbons recruited 22,000 new collectors in 2007, compared with just 950 a decade earlier.

Against that growth in demand, very rare stamps have performed strongly in recent years. The SGS30 index, produced by Stanley Gibbons to track the value of the 30 rarest British stamps, achieved a compound 10-year return of over 13 per cent a year. But rarity is crucial: of the three million or so stamps held by the company, less than 150 are of investment grade.

Stanley Gibbons offers a portfolio service for investors with more than £5,000, though, according to Mr Roose, the average investment is around £22,000. Clients are guaranteed a minimum 25 per cent return over a five-year period, with unlimited upside available if prices rise more dramatically. The vast majority leave their precious investments in the company vaults, rather than taking them home to pore over, adds Mr Roose. There is no management or portfolio charge; Stanley Gibbons takes its cut through the dealing mark-up.

Note too that Adrian Roose does not refer to much bandied and indaquately based assertion of 38% increase in the SG rarities index in 2007. The index is based on auction prices achieved - and since all of the 30 rarest UK stamps do not appear at auction in any given year this means of valuation can only be responsibly used over a longer period. Perhaps Adrian should take over the marketing.

I continue to keeep an eye on Noble Investment (NBL), the coin dealer trading as A H Baldwin, as an additional indicator of what might currently be happening to rare stamp valuations. They too are covered in the IC article.

The investment market in coins is large and well-established in the US, but in the UK it is under-researched and under-promoted, according to Ian Goldbart, managing director of specialist coin dealer A H Baldwin & Sons, and adviser to the Aim-listed fund Avarae Global Coins. However, he says investors have been making enquiries recently on the back of the general flight from the stock, bond and property markets.

"Our research suggests that, over a long timescale, coins are as good an investment as most things," says Mr Goldbart. "English coins over the long term have returned 10 per cent a year. But the key is to look for the highest possible quality and rarity – very rare pieces keep their price in the face of any downturn. There is no weakening in the market at the top end."

Avarae was launched in 2006 in response to demand from several large institutional investors for an opening into a new alternative asset class, and its main shareholders still include BlackRock, Jupiter and Allianz. The fund is still only around 80 per cent invested, so these are early days. The idea, says Mr Goldbart, is to build up a "critical mass of different coin sectors, rather than unrelated valuable coins, because a good collection of a particular period or country adds value and will attract collectors at auction".

The share price has "dropped like a stone", more than halving in value during the past year as panicky shareholders have bailed out of the Aim market; but it certainly does not reflect the value of the underlying assets. This stands at around 11p per share, almost twice the share price of 5 3/4p.

Alternatively, if you'd rather remove the potential for such discrepancy between net asset value and share price by investing directly, it's possible to build a bespoke coin portfolio from £5,000.

Mr Goldbart emphasises the gulf in levels of interest, and volumes of rare coins traded, between the US and UK markets. "In the US, the rarest coins change hands for upwards of $7m and there are hundreds of pieces worth $1m-plus; in Britain the whole market totals around £50m a year. There's a lot of potential for growth, but it is a slow, plodding industry. Prices don't yoyo."


And finally, another 'rare stamps as an investment' thread has developed on TMF. It has relevance to the chart that appears on this board's header, comparing the SG30 with S&P 500.



Wilmdav

[chairman2] 12/11/2008 19:05

Robsy2

Fascinating snippet from the Investors Chronicle today

SGI have 30 000 auction-grade stamps in stock

Only 150 or which are rarities of sufficient quality to
qualify as investment grade.