Skate’s Target Price Increased from GBX 160 to GBX 180
On Monday, September 28, Stanley Gibbons, a UK-based philatelic trading and collectibles company, will pay an interim dividend of GBX 2 per share (the current share price is approximately GBX 140), which is unchanged with respect to the dividend for the same period last year and equivalent to about 40% of the dividend payout ratio. Stanley Gibbons thus maintains its position as one of the few dividend payers among the twelve international art industry companies included in Skate’s Art Stocks Index.
When Stanley Gibbons recently announced its half-year results, the company completely met our expectations by achieving 18% top line growth over the same period of 2008 and a 13% increase in profit before tax. Following a share price appreciation of 45% over the last six months, Stanley Gibbons shares traded at more than GBX 140 on September 23, 2009, edging very close to the GBX 160 share price target set by Skate’s at the beginning of the year.
The company’s strong push in online trading capabilities is based on extensive development of stamps and other collectibles databases and is supported by growing international sales efforts. In our view, this provides a sustainable growth opportunity in a space where Stanley Gibbons is the only sizeable corporate player. Skate’s also notes the stellar shareholder base and free float nature of Stanley Gibbons. With a current market capitalization of GBP 35.12 million, the firm remains attractively valued at less than 2 of projected 2009 sales and less than 10 of projected 2009 net income. Skate’s hereby raises the target price for Stanley Gibbons shares from GBX 160 to GBX 180 per share.
In the long run, we believe that a major concern associated with Stanley Gibbons’ business model is the overall limited potential for the philatelic market segment, which remains a less fashionable collectibles category and receives very little following from younger people. To date, Stanley Gibbons has had little success in diversifying into other categories – the autographs, records and memorabilia segment (the only non-stamps business unit) currently contributes to just over 10% of the top line. Furthermore, it experienced a 5% revenue decline in the first six months of 2009 (against robust growth in core philatelic segment). In our view, Stanley Gibbons is becoming more focused and more dependent on the economics of its philatelic trade and publishing, which could result in limited growth in the future.