Skate's Art Investment Review

MCH Group, the global art industry’s second largest public company after Sotheby’s, reported its 2010 financial results in March. In line with the industry’s robust performance globally, the Swiss exhibition operator reported a 30% increase in sales (growing to CHF 368 million in 2010) and a 28% increase in EBITDA. The EBITDA margin remained at an impressive 21% level. Classified as an art industry stock by Skate’s because of its Art Basel and Art Basel Miami Beach events, MCH Group has benefited from continued growth in the art market during 2010. In its annual disclosure, the company reported, “Art Basel and Art Basel Miami Beach ran in a highly gratifying manner, demonstrating their key importance as industry platforms.”

MCH Group remains fairly laconic with its disclosures, which makes it difficult to infer any specific trends apart from a consistently profitable business model and a product mix that continues to see the exhibitions segment contributing to more than 70% of the group’s sales. MCH Group continues to invest heavily in expanding its home exhibition market in Switzerland. In 2010, it directed CHF 98.6 million in capital expenditures (CHF 22.7 million in 2009) to a number of projects, including construction of new convention centers. It remains to be seen whether the company’s massive bet on its ability to grow the exhibition and shows sector will pay back with continued impressive top line growth or whether it will simply become a real estate investment and thus freeze MCH Group’s capital without translating into adequate growth.

MCH Group will hold its annual shareholders’ meeting on May 13, 2011 and is expected to announce the dividend at that time.

For the full article, including MCH’s recent financials, please click here.

To view Skate’s profile of MCH Group, please click here.

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The devastating earthquake and tsunami that recently struck Japan continue to have a significant effect on most sectors of the country’s economy. The Nikkei and TOPIX indices have declined dramatically as sell requests outweigh orders to buy. Among most affected sectors are the electronics and auto industries, insurance, and oil and electricity suppliers. The only exception is construction, which will probably benefit from the disaster and serve as a major force to boost the economy in the near future as Japan begins to rebuild in the affected regions.

Over the past week, Japanese art companies have also struggled to keep a regular schedule, with local auction houses postponing their sales. There are two leading auction houses in Japan – Shinwa Art Auction and Art Vivant. Shinwa Art Auction co., Ltd. is the largest Japanese art auction alliance. It mainly specializes in three segments: Modern Ceramic & Works of Art, Modern Art and UKIYOE / Modern Art Part II. These segments include Japanese paintings, Japanese oil paintings, and Japanese ceramics, as well as Impressionist paintings, post-Impressionist paintings, European decorative art, Japanese antiques, jewelry & watches, contemporary art and wine. Art Vivant Co., Ltd. is also a Japanese company that specializes in various segments, including sales of Japanese, American, European and Chinese art. Art Vivant’s business model is considerably more diversified, however, as the company also provides financial services for art buyers. Furthermore, it is active in other, non-related sectors, particularly the health and beauty industry where it operates resorts, fitness clubs and beauty salons.

As a result of the tragic events, the share prices of these two companies have plunged over the past week. While Art Vivant managed to regain value fairly quickly, in large part due to the company’s healthy diversification, Shinwa Art Auction has experienced a dramatic decline. Although it is still too early to judge, the catastrophe will likely have a limited effect on Japan’s art market. After little more than a week, we are beginning to see the indices turn in a positive direction.