Unless you're an avid collector of rare coins and stamps, it's unlikely you would know that Stanley Gibbons (SGI) is a leading global purveyor of these philatelic and numismatic products, as well as other collectibles, from military memorabilia to manuscripts. The business operates from retail outlets and online, it holds auctions, carries out valuations and offers investment services for wealthy people across the globe who want to diversify their portfolios. Last November, Stanley Gibbons made big news in the world of rare collectibles with the acquisition of Noble Investments. This strategic merger saw the two largest players in coins and stamps join forces to form a company with formidable industry clout. Yet the valuation still remains undemanding, particularly after a recent drop in the share price, making this stock a rare specimen to add to your collection.
- Low PEG ratio
- Net cash
- High growth forecast
- Cost savings in store
- Noble acquisition
- Economic slowdown
- Obscure market
The £45m Noble acquisition will not only give Stanley Gibbons the advantages that come with sheer scale, but will lead to significant integrational cost savings, the benefits of which will be felt later this year and are expected to reach £0.9m in 2014, rising to £1.8m in 2015, based on broker Peel Hunt's forecasts. The merger makes a great deal of strategic sense too, as it offers lucrative cross-selling opportunities. For instance, last year revenue in the rare coins and military medals category rose more than three-fold, helped by a £0.4m contribution from Noble's coin subsidiary Baldwin's, which sold stock to Stanley Gibbons' high net-worth clients. These kinds of opportunities will only increase in number in the coming years.
The internet has become a powerful tool for high street retailers, and Stanley Gibbons in no exception. The group is investing heavily in developing a global online collectibles trading platform, due to launch in the second half of this year. Currently, online sales represent just 8 per cent of the total in the first half, so given the scale of collectibles already traded on the internet, the new portal could be transformative.
| STANLEY GIBBONS (SGI) | ||||
|---|---|---|---|---|
| ORD PRICE: | 312p | MARKET VALUE: | £145m | |
| TOUCH: | 312-313p | 12-MONTH HIGH: | 384p | LOW: 266p |
| FORWARD DIVIDEND YIELD: | 2.4% | FORWARD PE RATIO: | 13 | |
| NET ASSET VALUE: | 182p* | NET CASH: | £17.3m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m)** | Earnings per share (p)** | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 35.7 | 5.1 | 18.3 | 6.0 |
| 2012 | 35.6 | 5.5 | 19.4 | 6.5 |
| 2013 | 39.7 | 5.7 | 16.4 | 6.5 |
| 2014** | 66.4 | 11.2 | 20.4 | 7.0 |
| 2015** | 73.2 | 13.3 | 24.0 | 7.5 |
| % change | +10 | +19 | +18 | +7 |
Normal market size: 2,000 Market makers: 5 Beta: 0.20 *Includes intangible assets of £34m, or 73p a share **Peel Hunt forecasts, adjusted PTP and EPS figures | ||||
Of course, the company continues to expand physically, too. Last April, a new office opened in Singapore, complementing the Hong Kong base and broadening Stanley Gibbons' footprint in the Far East. The group is also investing in new HK premises, so that it can showcase a selection of high quality collectibles in a more professional setting and attract business from Mainland China.
The collectibles market is admittedly very esoteric and the global economic slowdown might well temper demand. But, it's equally likely to drive investors to park their money in alternative assets, particularly rich emerging market investors seeking shelter from weakening home currencies. It's worth considering, too, that the recent slide in the price of gold may drive people to look for other avenues in which to store their wealth - rare collectibles being one such option.
The fact that business is booming is another reason to like the company. In the twelve months to the end of December underlying trading profit rose 9 per cent to £6.9m, on 16 per cent sales growth - and that was almost entirely without any contribution from Noble. EPS growth is expected to come in at 24 per cent this year and 18 per cent in 2015. That puts the shares on a lowly forward price-to-earnings-growth (PEG) ratio of less than 0.9 (anything under one is usually considered 'cheap'), and that's before factoring in the cash pile. Hardly demanding for a company with sector-beating growth prospects.
