Stanley Gibbons Share Discussion Threads

[dashton42] 07/11/2012 08:10

Rotors, good point about the Royal Warrant. As well as in the US, this would presumably play well in other countries with a positive view towards royalty, and by extension companies that have the royal stamp (?!) of approval.

I guess though this gets to the nub of the branding of the US website - i.e. whether or not it uses the Stanley Gibbons name and is closely identified with the company, or has any more prominant links to Stanley Gibbons than the adverts it already displays.

[rotors] 06/11/2012 18:56

I agree that there is some very high quality research on this company on ADVFN. Thanks to all for mature and reasoned commentary.

On a more simplistic level, apart from a potential currency 'kicker', I think the US purchase could capitalise on the fact that Stanley Gibbons hold a 'Royal Warrant'. The US has always been jealous of our history and monarchy and I feel that SGI can take advantage here. I quote from the website:

"Royal Warrants are a mark of recognition to individuals or companies who have supplied goods or services for at least five years to HM The Queen, HRH The Duke of Edinburgh or HRH The Prince of Wales. Warrants have always been regarded as demonstrating excellence and quality, and are highly prized."

I am bullish of this purchase and think that the share price will soon reflect a revaluation of prospects.

Rgds, Rotors

[dashton42] 06/11/2012 18:37

Thanks for all the analysis, G1TY. Will need to mull over this in more detail.

By the way, I see that the acquisition and placing formally completed today. I think that SGI normally give a trading update in January, so I suspect it may all go a bit quiet newswise until then.

I'll be keeping an eye on the UK bidsmart website though, just to see if I can see signs of it being tweaked for the domestic market. A start would be seeing items listed in sterling first, rather than in dollars!

[graham1ty] 06/11/2012 10:41

Management equity exposure.

In 2004 Mike Hall had 70,000 shares ( worth about £60,000) and options over 55,000 shares at an option price of 74p.

In 2010 Mike Hall had 136,000 shares ( worth about £150,000) and options over 485,000 shares at an average exercise price of £122p. That year his LTIP shares were allowed to lapse ( 142,000 at 224p)

Now, he has 147,000 shares ( c £320,000)and 605,000 options at an average of c 140p ( he was issued another 160,000 at 179p in the year)

He has equity exposure of £320,000 directly and another c £500,000 through "in the money" options.

If the price gets to £4 ( surely a goal over 5-10 years and he is still young), then just over £2m quids worth. That should be enough incentive. If he gets this right, and his dream for SG is realised, he is quite a rich man.

I do wonder though why he did not buy more at 195p in the Placing ? And when you are paid £225,000 pa, why has he got only 10,560 more shares now than he had 3 years ago ? and only 70,000 more shares than 8 years ago ?

ps, I believe all the above to be accurate from old reports and research: apologies for any typos, mistakes....

[graham1ty] 06/11/2012 10:28

Forecasts.

In 2005 forecasts were for t/o of £18m in 2006 and £22m in 2007. Eps of 10.9p and 14.6p. They actually came in at £17m and £20m, eps of 11p and 13.5p. MISSED FORECASTS

The next research I have is 2009. Forecasts of £21m in 2009 and £22m in 2010, eps of 17.4p and 20.1p. Actual £23m and £26m. Eps of 14.7p and 15.2p. MISSED FORECASTS

2010 research: 2010 revenue £25.8m, 2011 revenue 29m, 2012 £30.4m, eps of 15.6p, 18.4p and 20.1p respectively. Actual 2010 revenue £26m, 2011 £36m so growing revenue far faster than forecast. Eps however for 2010 of 15.2p and 2011 of 18.3p. PRETTY MUCH on track

2011 research 2011 revenue £29.7m, 2012 £32m, 2013 £33.6m. Eps of 17.4p, 18.9p and 20.6p. As above 2011 revenue came in way higher and they reported eps of 18.3p, ahead of the June 2011 forecast. We do not have 2012 or 2013 actuals, so cmpare these to curent forecasts: 2012 revenue £37m ( ahead); 2013 revenue £40m ( ahead). 2012 eps 18.4p ( small downgrade) and 2013 17.4p compared to forecasts of 20.6p made one year ago......a 15% DOWNGRADE.

So, back in August 2009, eps of 20p was in sight and was forecast for 2010. Now, three years on, it is still not in sight......and looking at least to 2014

Are SG growing fast, but failing to deliver eps ?

[dashton42] 06/11/2012 09:09

G1TY - had to just quickly respond to a couple of your points.

I don't think that the placing procedes are to be used to invest in more high end stamps - the stated intention of raising the cash was to:

"...make significant additional investment in the working capital of bidStart in terms of personnel, technology and marketing over the three years following the Acquisition. The Placing will also provide the Company with funds to pursue other growth opportunities in its core businesses."

I think they'd already splurged out on high end stamps previously (see previous RNS notes), "...in readiness for the launch of rare stamp fund in October". Hmm..

I think you're absolutely right about the necessity of a multi-channel approach to breaking up and reselling collections; that's what they currently do, although hopefully at some point they can switch from using Ebay as their intermediary (they still have a large presence there), and can use their bespoke e-commerce channel instead.

Talking of which, I'm fascinated to know their intentions regarding the branding and development of bidstart.

Is it going to use the SGI name (possibility of reputational risk with dodgy sellers or auction practices), is it going to be renamed (personally, I don't find the name "bidsmart" particularly memorable or evocative), is the service going to be redesigned (again, I find it to be a bit "work in progress" at the moment), is it going to be rolled out globally (once its in a fit state), is the existing SGI website going to be integrated with bidstart (or vice versa)?

It'll be interesting to see if SGI starts buying up domain names for the asian, south american, european markets etc., as an indication of preparation for a global e-commerce push.

Woody - regarding your comments on the need to be seen to be increasing earnings year on year by the City, don't we already know that this acquisition will depress the eps figures for the next year or so - hence this doesn't seem to have been the motivation for this transaction, at least in the short term?

[dashton42] 06/11/2012 07:36

Interesting views in both of the last posts.

Regarding G1TY's comments on Ebay, I too am a fairly regular bidder on it for stamps, and other things besides. SGI already has a presence there - listing some of their less than sublime items, plus accessories.

To me, it makes complete sense for SGI to develop their online presence, to redirect a share of high volume/lower price Ebay revenues directly to themselves.

I agree that the size of the existing revenues from bidstart is surprisingly small - it seems to me that there aren't a huge number of unique sellers using the site, and also there seem to be many fewer private individuals listing the odd item with a low start (and attracting many bids), rather than business sellers listing a large number of (buy it now) items.

I haven't looked at the charging policy in detail, but I'd imagine it's cheap as chips in comparison to Ebay, to try and encourage more users to buy and sell on the site - hence the low revenues.

So, time will tell if SGI a) overpaid for bidstart, b) if their young new internet and US CEO can grow bidstart into something to rival Ebay in the collectables market, c) if growth can take place without diminishing the SGI brand, d) if the remainder of the placing cash will be wisely spent, e) whether there is a working capital cashflow problem as suggested by Woody, etc. etc.

Plus, what happened to the rare stamps fund?

I'd be the first to agree that there seem to be all sorts of risks associated with this company, and I'm anxious to hear news about their strategy and implementation plans going forward.

Still, as SGI forms only a relatively small part of my portfolio, I think that recent developments are potentially very interesting, and could pay off if the execution is right. I'll stay aboard, and see how things pan out.

[woodcutter] 05/11/2012 20:33

Interesting comments from G1TY and since the announcement and further director buys it seems to have rallied somewhat. It's interesting how we see things sometimes from a differing perspective. As many will be aware I was a holder and sold as a result of this acquisition principally on the working capital issue. For me the attraction has always been that it would be a niche business trading on it's reputation as a quality driven provider of a top quality portfolio of stamps to a small group of relatively wealthy collectors (a bit like the art world). I always figured there was growth in the business and that more quality product (stamps and other memorabilia) would become available as they grew globally.

However on reflection i think the move to an ebay type expansion of their business model is questionable. firstly it diminishes the brand. Further, it raises the question of growth in earnings at any cost. By this i mean who are they now trying to serve, their shareholders or the suits in the city............ or maybe both.

There may be those who feel uneasy with my comments and i gave it considerable thought before posting this but i have a number of friends who have been, and some still are, CFO's of businesses in the ftse350 and they all have, at times, noted the compelling need to satisfy the demands and pressures of the city in terms of increasing earnings year on year, sometimes to the general detriment of the business. A short cut to earnings growth at the expense of growing the business in the right manner.

In my view we may (note may) be witnessing this with sgi. Time will tell if it's the right move and in the short term the share price seems to be reacting favourably.

I continue to watch with interest.

Woody

[graham1ty] 05/11/2012 16:50

Couple of comments. Have been holder on and off for over ten years.

First, SG is acutely aware that thy have no foothold in the mindboggling volumes of say, EBay. If u can act just as a platform, do nothing and cream off commission ( ie listing fees) then go for it......as long as there is no reputational risk to the high end stuff. SG will still have a negligible market share of the volume end, but as a frequent, daily, user of EBay, almsot all transactions in stamps are low value, pretty avreage quality stamps ( note the SG R said only 1 in 100 stamps are "catalogue quality"). This is incredibly lucrative for EBay who do nothing other than provide the platform.

Second, re the acquisition: can anyone tell me whay a site with 3.5m unit sales, and over 6m listed, had revenue of only $300,000. Even if the 3.5 sales are over 5 years and they are currently doing 1m p.a., that is still just 2-3c per item. EBay take up to 20%, probably an average of 50c ++

Third, re working capital. SG are beeing incredibly optimistic ( naive ?) about the continuing trend in top level stamp prices. Bold statements about stamps always going up, and stamps being the best place for their cash, really do show a lot of faith.....I think the £6m was solely opportunistic. This is a very cash generative business, with no cash flow problems. I think the £6m will got straight into stock and they hope they can make enough of a margin. It is a hefty stock holding they have ( question: does SG buying c£20m of stamps at the top end actually raise prices ? Are they supporting high prices artificially ?).

Last, the Fund. Been mentioned for years now ( found a reference in an AR of six years ago). They say they have been buying stock TO SUPPLY the fund. How will that work ? Can they take a turn selling into the fund ? Surely not ? Ae they going to pass on at cost this high margin stuff they are holding ? Will independant Trustees/Fund manager go out and buy where they can ( which might or might not include SG ?). How can they start the fund with their own stock without immediately profiting at the funds expense ?

SG remains a cracking business, cash generative and raising its profile worldwide. Whether they will get the balance of quality/rubbish right remains to be seen. For the reputation and name they have, the brand is grossly undervalued. But with a young CEO ( with very few shares.....), they could so easily go off the rails ( ie all the provisions for the guaranteed return inevestment products.....)

I remain a keen holder

[dashton42] 05/11/2012 12:23

Excellent news; as I was secretly hoping, Simon Thompson has come out in support of SGI's aquisition of bidStart in today's Investors Chronicle. I was hoping that the lack of coverage following the news last week meant that either a) SGI was to be tipped on Fiday, or b) that Simon Thompson would cover it in today's update - which he did.

For the moment, at least, I'm glad I kept the faith.

Now I'm off to read his article properly...!

[jeanesy2] 01/11/2012 19:53

I see there was some additional director buys, that is probably why there was some rally yesterday

[martpow] 01/11/2012 16:04

I too have sold out due to the extra risk. I have held them for a number of years but I am concerned about the risk of this going sour and the uncertanties relating to the need for the cash . Some times it is not what you can make but what you can lose. It has been a good investment.

[westcountryboy] 01/11/2012 12:13

Thanks for new estimates. I too have sold out, FWIW, but will continue to monitor. The jury may be out for some time...

[dashton42] 01/11/2012 10:31

Fair enough Woody. You could be right in your suspicions (but hopefully not, for the sake of continued holders!!)

I can't help wondering that if there were cashflow problems, SGI would have highlighted this and got the bad news out of the way, rather than saying that the post-purchase balance was earmarked for the development and expansion of their online offering. They haven't previously struck me as a company that tries to bury bad news, but - as always - I could be wrong.

I do know that SGI is one of those companies that people have strong views about, one way or the other. Me - I'll give them the benefit of the doubt, until I hear news (or possibly rumours) to the contrary.

btw, good luck with the new purchase.

[robinnicolson] 01/11/2012 10:03

Peel Hunt's changed forecast:

Adjusted EPS:
2012E: 18.4p
2013E: 17.4p
2014E: 19.0p

DPS:
2012E: 6.5p
2013E: 6.5p
2014E: 7.0p

[woodcutter] 01/11/2012 09:56

J2/D42

Thought i ought to be fair and let you guys know I sold out in the end yesterday.

Can't reconcile the funds raised with the purchase of the business, £6m for £600K. It seems to me that they have a working capital cashflow problem and this may be due to lower sales revenue since H1 results, i might well be wrong but i just felt uncomfortable with it.

I think in the longer term this may well be a goood acquisition so i'll keep an eye on things and see how they develop.

Good luck guys if you're still holding.

Put a small part of proceeds in nbi this morning.

Woody

[tom.muir] 01/11/2012 09:41

Those eps estimates are the same ones as before the anouncement.

[3800] 01/11/2012 09:27

2012 2013
Broker Pre-tax (£) EPS (p) DPS (p) Pre-tax (£) EPS (p) DPS (p)
Peel Hunt 5.50 18.76 6.50 5.98 20.41 7.00
rec Buy
Even with the increased risk I'm not yet rushing to sell
3800

[westcountryboy] 31/10/2012 22:03

Do you have eps figures from Peel Hunt please? A 15% reduction from the old eps estimate for 2013 would be to 17.35p. Not exactly wonderful.

[robinnicolson] 31/10/2012 20:36

The Peel Hunt note published today is bullish; they retained their buy recommendation. They reduced their estimates by 15% to reflect a £0.3 million reduction in their forecast PBT, as the company invests in bidstart and the higher number of shares in issue.

They also said in their research note that the acquisition "could be a game-changer for the company". They believe bidstart is an "excellent platform" which "should be turbo charged by the SG brand, marketing spend and development".

The Times article mentioned that the global collectibles market is worth $200 billion, of which ebay currently has a 2.5% share.

[dashton42] 31/10/2012 18:44

Robinnicolson - interesting to hear about the somewhat mixed note from Peel Hunt, thanks.

It's also good to get opinions from so many different angles - I come at this as a small PI who's also a collector, and who tends to focus more on the overall strategic direction than on the immediate financial nuts and bolts.

Woody - I certainly agree with your views on banking profits! Although, in this case, I'll let mine run for a bit longer, as the second half of the Peel Hunt note seems to chime with my gut feeling. Could be wrong though - certainly have been many times in the past...

Btw, there's a note in the Times, but as I'm not a subscriber, I can't access it. No sign of anything in Investors Chronicle yet, but as SGI is part of Simon Thompson's bargain portfolio, I'd be surprised if this didn't rate a mention soon.

[jeanesy2] 31/10/2012 17:45

Peel hunt do not believe this acquisition is going to add any profit in the next 2 years then?

[battlebus2] 31/10/2012 17:14

Watching this with interest, may buy back in if the price falls to 195. Looks a decent move.