Stanley Gibbons Share Discussion Threads

[bookbroker] 13/1/2010 19:17

They are unlikely to have any outstanding guarantees, otherwise the liability would be carried on the balance sheet most probably as an accrual or under creditors, it is something they would be obligated to state, I don't think one should be too alarmist.

[robsy2] 13/1/2010 18:07

I am out and have been for a while but drop in from time to time to see how things are going. I think Chairmans excellent post sums up the dilemma and why I am not a holder. Good luck to the faithful and keep those excellent postings esp Cod and The Chairman, its worth dropping in just to read them!
R2

[weemonkey] 13/1/2010 17:23

now that the world has gone into recovery mode stamps could be vulnerable as a store of value.

what concerns me is what exposure does the company have on the guaranteed products it has already sold.

how big is its potential outstanding liability on them - who knows

[wjccghcc] 13/1/2010 15:07

Well I sold up yesterday at 132p (breakeven) and increased my holding in NBL. Similar valuation, stronger balance sheet and management seem more reliable. As Chairman says, SGI have the name but don't seem to know how to maximise their returns from it - too many new projects that seem to end in tears.

[jtcod] 13/1/2010 13:53

Nice post Chairman.

For me though the Stagecoach reference proves that all it takes is one person who actually understands the business and is prepared to work his or her butt off to make a success. The rest are superfluous imo. SGC is not a one off either. I have seen a number of examples over the years.

It occurs to me that the investment trust will put at least a short term supply demand constraint on top quality stamps so maybe greater investment profits could be achieved by investing in the fund rather than SGI.

[chairman2] 13/1/2010 11:24

I agree with the heavyweight comments and the gentlemen versus
players cricketing argument made me smile

History is littered with Players burning to show themselves better
than the gents who 'do nothing in particular and do it very well!'

Braislford tho' is a serious plus for this business and its partly
because I think he values his personal reputation far higher than
any small scale chicanery that I think a number of institutional
funds have backed the company over the years.

Mike Hall 'tho is the only remotely entrepreneurial character in
the place - and it is that fact and the thin-ness of talent
beneath him that Brailsford and his chums are dealing with in the
appointment of Duff.

The comparison with Brian and Annie Soutar ( a player not a gentleman
if ever there was one) is of course very eye-catching. Soutar has
conquered a world in which the real wealth is in the hands of
governments and similar administrators. He is ace at dealing with
'gentlemen' senior civil servants who in turn are reassured by feeling
superior to the 'pleb' even tho' the pleb can run things, get things done
and run rings around them personally. But the real secret is entirely
different: Stagecoach is really a family business - if you are a Soutar
that is - and it is Brian's fervent belief that 'It is his own Money'
that is at stake that keeps the company performing. As an (ex) banker
it is exactly what we would look for in an executive to run any company
in which we were investing or lending.

turning to the stamp business. There are a nunber of major paradoxes
and parallels that are difficult -difficult even for a knowledgeable
management - to get around.

- 99% of catalogue stamps are to all intents and purposes worthless.
(thats why the business will always be a collectors business not an
investors business).
- of the 1% left probably 75% are of seriously limited value because of
condition. (But the holders are mostly unaware of their true position)
- high value stamps cost a lot to carry in inventory - thats why dealers
need to have arrangements like the guaranteed sales to get collectors
to carry the cost
- high value stamps are like currency - portable, fungible,
uncontrolled (unlike works of art) and very secretive. It is difficult
for any one dealer to get traction over such a liquid trade.
- direct sales (E-Bay, internet) are a very competitive competitor for
dealers making their 30 -50% margin on selling difficult to sustain.

Stanley Gibbons does have advantages:-
- it can make a lot of money from selling ancilliary products
- it has a stranglehold on information (like De Beers it is in
a sense adjucator of value, authenticity, condition, etc.)
- it cant seem to make real money from selling its information - the
catalogues are effectively free.

All of the trading issues are well flagged and very visible - and yes
it is and will remain a small business - albeit a "growth stock".

No one who has visited the shop front on the Strand can believe that
SGI really understands marketing. The memorabilia business for a start
ought to be a hundred times more visible and 50 times larger than it
is.

A lot of money could be made in the short term if SGI made more of
its proprietary trading - but only by trading against its best
customers - and they would quickly sus the situation out. As it is
SGI's bread and butter is buying 'collections' and having channels
to get rid of the dross, and time to hold and re-sell the few jewels
it acquires along the way and the ability to tell the difference.

Like De Beers' monoploy of trade in diamonds which collapsed in 2005-7
SGI's years of pricing control are proving to be a two edged sword. To
sell stamps as an investment they need to show that chart of top 30
stamps with ever rising prices. But then they cannot take advantage
of the cycle at times like this by letting prices fall in order to
encourage new buyers. So market balancing gets more difficult
as the years go by.

My own view is that its not a bad business but as a public company
it is hugely difficult fro them to trade counter cyclically. (they
ought to be buying like mad at the moment at 30 - 40% lower prices
than 2 years ago. But then there inventory and financial ratios
would get shot to hell). Instead they have gone for prudence and
drawing in their horns against the headwinds to come.

[masurenguy] 13/1/2010 11:24

Hmmm.....'reason to hold' but maybe still not a reason to buy !

Remains on my Watchlist but I'm still sitting on the sidelines here.

[bookbroker] 13/1/2010 11:20

This management must get its focus right, they have a brand name that is synonymous throughout the world, irrespective of whether you are a stamp collector or not, Stanley Gibbons is a name that few have not heard off, are they doing enough to exploit the opportunities that this enables?

[hywel] 13/1/2010 10:37

From the Times today:

It is often said that Stanley Gibbons's products are a better investment than its shares.

The AIM-listed rare stamp dealer did little to alter that perception yesterday with a profit warning that pulled its stock down nearly 8 per cent.

The company cautioned that its withdrawal from selling stamps as investments with guaranteed levels of returns would have a short-term impact on margins - principally because such schemes enabled it to recognise more profit upfront. Stanley Gibbons has also suffered from the side-effects of a resurgent stock market, with some clients preferring to put their cash into equities than the lower risk returns offered by stamps.

But even after such downgrades, last year's pre-tax profits should still be 10 per cent ahead of the previous year - and should show similar growth this year. The London International Stamp Exhibition, a once a decade event that takes place in May, should provide a fillip to sales, as should commissions from the launch of a £10 million rare stamp investment fund.

Longer-term initiatives are also promising - whether Stanley Gibbons's exploratory talks with potential partners in China (where there are as many stamp collectors as the rest of the world put together) or the development of an online catalogue of lower-value stamps through which the company hopes to reach a wider audience. At 131½p, or eight times 2010 earnings, and yielding 4 per cent, a strong brand and potential give reason to hold.

[wilmdav] 13/1/2010 09:38

Chairman

The FD is pretty invisible in presentations etc but in my view his
presence is a plus for shareholders.

That continues to be my impression.

The size of the Board has more to do with the need to keep sweet
the Guernsey - CI mafia than the needs of the company. It is a tax-
haven company remember.

Interesting comment. The Board is very Jersey/Guernsey heavy. Chairman Bralsford and General Sir John Wilkes were both executives of C.I. Traders, where Donal Duff, the new appointment was also a director for 5 years. Robert Henkhuzens also appears to be Jersey based. Mike Hall is a Guernsey resident. That only leaves 3 others.

The new appointment is either:
a) preparation for CEO to takeover as Chairman eventually by
grooming a successor; or, more likely
b) Critical to future of co are international operations esp
China. The existing management are very stretched in controlling
selling and financing ops and staffing from the Gulf to the both
sides of the China Sea.

IMO definitely not (a). Appointing Mike Hall as chairman would be like appointing a 'player' rather than a 'gentleman' to captain the England cricket team before the war. Actually Martin Bralsford and General Wilkes are very impressive characters.

As you say, something along the lines of (b) is more likely. Might the proposed investment fund be a factor?

[bookbroker] 13/1/2010 09:16

JTC - too many exec. dir. as I said, they need to identify to shareholders what each of them is actually doing, unless they are all helping each other out, as this co. seems to be a reincarnation of CI Traders in terms of the board

[jtcod] 13/1/2010 08:40

Fred
I am not sure it is a profit warning. I thought the forward looking comments were pretty confident. We live in hope. ;-)

[jtcod] 13/1/2010 01:18

Chairman
Thanks for the feedback. I know very little about the FD and I am glad to hear you have faith in him. Like you I welcome the more prudent approach.

I am still not convinced though about the number of Directors and Execs. They keep hiring people and it says to me perhaps they really don't understand the business themselves. This is a piddly little business. Brian Souter plus one other Exec Director have run Stagecoach for years and they covered UK, USA, New Zealand, China and Hong Kong at one point. They still run the business better than any competitor imo. It's a Full Status company and Souter still has time to present to analysts personally for twice as long as most other execs. These 2 people have run a £1.25bn Cap, £2bn revenue business, have tripled earnings, halved debt and bought back 45% of the equity all in 5 years whilst hindered by meetings and negotiations with rail track the OFT and Competition Commission on a regular basis.

When I look at SGI in comparison, they have the best world brand in a market that is dependent upon trust. That plays right into their hands. They only have 1% market exposure so far and yet with an veritable army of Execs compared to size they are still spinning wheels trying to get traction on growth. I can live with the market not pricing a stock fairly for a few years but this is down to the management imo. I am not impressed and also pretty relieved right now that this is my smallest investment.

[johnstonp] 12/1/2010 22:32

if you look at chinese stamps you will find it a lucrative market

[fred123] 12/1/2010 22:29

Was that a profit warning?

Agree with long-term holders' views - one myself -but really...

What has made me nervous have been the ads for GUARANTEED returns - well subscribed, but com'on guys hostage to fortune or what. Many a Peter has been robbed for a Paul for such schemes in the history of capitalism - still we only need 0.1% of the Chinese to diversify into stamps...

[bookbroker] 12/1/2010 20:57

What time of night do you normally visit, explain the £1, we are going to see earnings of at least 13.5p, at that for the brand itself they would well undervalued.

[bookbroker] 12/1/2010 20:54

I think it would be unreasonable if there were, The shortfall is due basically to the fact that they would have earn't near on £1m. should the revenue from that £3.4m deal in 2008 been booked, they would have even met the forecasts, it was not a given, maybe they should have made it clear when it was immediately apparent that it was not going to take place. Even without it they have performed pretty well, it all comes back to consistency of earnings, they don't want to be too erratic in their statements, it was the same this time last year. Nonetheless the management do seem to be pretty competent at driving sales forward just got to maintain the margin.

[hotmark] 12/1/2010 20:48

I think it will slowly drift down towards £1.

I've called into their shop on The Strand a few times now and it's always empty.

[jeanesy] 12/1/2010 20:41

Where do fellow investors think the share price will go short term? Do we expect a hammering in the press tomorrow?

[wilmdav] 12/1/2010 14:56

JT

Largely agree on all fronts.

Several respected PIs on TMF have long expressed distaste at these guanteed offerings both from the point of view of risk and because they come from the same mind set as much of the marketing - more like that of a high street discount store and considered anomalous to the gold plated brand of Stanley Gibbons.

If you sign up for the email letters, you will receive an "offer that you can't possibly refuse" every other week at least from CEO Mike Hall. Thankfully these emails are occasionally written by others. The latest is particulary good from his PA, Melanie Shute.

I have met Mike Hall and would say that IMO he has some excellent qualities but writing marketing material is not one of them.

I would like to think the retreat from guaranteed products is partly due to influence of someone within the company who shares the views outlined above.

PTP might be down but 20% increase in revenue is 10% (£2m) above current forecast.

bookbroker

Interesting what you say about sales practices in the art world. The contracts for which revenue did not materialise were like that except that the company agreed to return all the deposit if the client pulled out after 12 months!

[bookbroker] 12/1/2010 14:23

I think it makes SGI's business much more transparent ceasing the offering of guarantees.

[bookbroker] 12/1/2010 14:22

There is off course no certainty with the system of offering guarantees, I suppose what it involved was that the co. would offer the credit terms for a portfolio that enabled the acquirer to put down 10% with the order, and that the acquirer of the goods had a certain period of grace between fulfilling his side of the deal, and in that time the value of the portfolio was expected to appreciate to a level whereby. However if the valuation had not reached a certain level he was not obligated to pay the remaining amount, thus not receiving the goods, but in the process losing his deposit and possession. Slightly obscure way to do business, similar mode of operandi seems to exist in the art world on behalf of vendors, auction houses offering a guaranteed minimum price on the picture. Fine if prices are constantly rising.

[jtcod] 12/1/2010 13:09

2 things spring to mind here:

1) Could the launching of the investment fund have played a part in the decision to reel in the guarantees business?

2) Could the launch of the investment fund have also played a part in the company strengthening their cash position and therefore forcing the management to reduce an area of business along the lines of reducing capital requirements? (Guarantee business drawing the short straw.)

I could be on the wrong line here and it doesn't matter really. I am happy that they have reduced the risk. I am not a fan of the management though.

[undervaluedassets] 12/1/2010 12:55

does the statement intimate that this lot have got in trouble with some of their investment guarantees?

They are suggesting that they are managing risk by steering away from this kind of guaranteed product going forward.

what do people here think?