MIDAS SHARE TIPS: Wealthy customers give Stanley Gibbons stamp of approval and make it a growth share backed by dividends

By JOANNE HART, FINANCIAL MAIL ON SUNDAY

Updated: 06:43 EST, 19 January 2014

Stamp collecting is usually associated with little boys or elderly men. But for rich individuals looking for something different to do with their money, stamps are more than just a collector’s item, they are an investment.

Stanley Gibbons is one of the best-known stamp specialists in the world, with about three million items on its books. In November, the group acquired coin business Noble Investments, which owns about a million coins. The combined group has ambitious growth plans and the shares, currently 366p, should provide strong long-term growth.

Midas recommended Noble in May 2012, when the shares were 197p. Investors did well as the Stanley Gibbons deal valued each Noble share at more than 250p. Investors received 192.5p in cash and 0.21 Stanley Gibbons shares for every Noble share they held, so they are now own a considerable stake in the combined business.

Strong: The firm makes most money from its shop and auctions

This looks like a good position to be in. Stanley Gibbons chief executive Michael Hall has known Noble boss Ian Goldbart for many years and the duo are determined to make a success of the joint firm. Goldbart also has about £1 million of his own money tied up in Gibbons shares, so he is incentivised to make the business work.

Stanley Gibbons has traditionally made most of its money from buying and selling stamps and from large auctions. Noble has followed the same path, but with coins. Now Hall is upgrading the group website, adding more stock and allowing third parties to buy and sell stamps and coins on it, from which the firm will get a commission. 

Demand is definitely there, as £600million of stamps are sold on eBay each year, mostly in lots of £5 or less.

Hall does not expect his market will reach these levels, but collectors using the website will have the reassurance that they are dealing with specialists.

Last year, 6 per cent of Gibbons’ turnover came from online sales, but Hall expects the website to generate 40 per cent of group sales over the next three years, which should deliver substantial growth to both turnover and profits.

When Hall arrived at Gibbons in 2000, most customers were 65 and over and the business was struggling. Under his stewardship, it has been turned around and a new breed of customer has come in – wealthy entrepreneurs, financiers and City lawyers.

They certainly need cash as serious collections start at £30,000 and cost up to £10million. But many investors develop a passion for collecting.

Chinese enthusiasm for stamps and coins has also mushroomed recently, driving prices higher and highlighting the investment potential of collectibles.

Midas verdict: Stanley Gibbons is a strong business, fortified by Noble. Both Hall and Goldbart are keen to deliver shareholder growth and there is a progressive dividend policy, too. New investors should buy. Noble investors should hold on to their Gibbons shares.

Traded on: AIM Ticker: SGI Contact: stanleygibbons.com or 01534 766711