Pick of AIM by Miles Nolan

Political and economic turmoil, combined with low interest rates, provides the perfect backdrop for investors seeking tangible assets. Founded in 1856, the world’s leading brand name in the stamp market is AIM counter Stanley Gibbons.

Based on the Strand, it also has the largest shop, with three million stamps and over 60,000 signatures. Stamps are the most collected items in the world, with a total market estimated to be worth $10 billion a year. It is a hugely fragmented sector, which is occupied by 60 million collectors – 20 million in China alone. Indeed, Stanley only has a 1 per cent share of the market.

Recent results
for the year to December showed a 13 per cent hike in sales to £26.4 million as pre-tax profits edged 5 per cent higher to £4.3 million. Stanley has benefited from sales to ultra-high-net-worth clients, thanks to its ability in sourcing rare collectable ‘trophy’ items.

The intention is to build awareness in more emerging markets and push its online sales efforts. Stanley also hopes to benefit from the Royal Wedding and sale of associated first day covers, as well as other commemorative products.

It also expects the 2012 Olympics to provide a welcome boost. Recently appointed broker Peel Hunt predicts 2011 pre-tax profits of £5.4 million and EPS of 18.9p. Stanley has plenty of asset backing, so at 175p a forward p/e of just nine is derisory.

Coining it in
Meanwhile, activity in the rare coin market has remained brisk due to an influx of new buyers. This was evidenced last year when a 1794 US silver dollar coin was sold for a world record $7.8 million, and a unique 1943 Lincoln coin achieved $1.7 million.

For exposure to both the coin and stamp market, turn to AIM rival Noble Investments. The quantum leap for Noble was the £4.5 million acquisition in 2005 of renowned coin dealer AH Baldwin. This was the last remaining family-run coin dealer and auctioneer in London, and now provides the bedrock to the business.

Auction premium
Noble produces a bi-annual catalogue of fixed-price coins that span gold, silver and bronze. They include Anglo-Saxon, Roman, Greek and a host of overseas coins. In addition, up to 20 auctions are held each year, where it charges a buyer’s premium as well as a vendor’s commission.

Built like Fort Knox, the head office site has an extremely valuable collection of coins that is likely to be worth considerably more than their book value. Noble acquired Lingfield-based Apex Philatelics to move into the stamps market. This business sells stamps from as little as £50 and undertakes four postal auctions a year. It boasts a collection of stamps that weighs four tonnes. Noble is currently looking at three potential acquisitions to augment future growth. CEO Ian Goldbart argues, ‘Our main constraint is not demand but the supply of material.’

In the six months to 28 February, pre-tax profits leapt 40 per cent to £1.5 million, but revenues slipped 8 per cent to £6.5 million due to the absence of a one-off sale in the comparative period. However, Noble achieved increased profits due to strong trading in both retail and auctions.

In addition to its expertise in the coin market, Noble also owns a valuable freehold property. House broker WH Ireland has upped its full-year forecasts to pre-tax profits of £2.6 million and EPS of 13p. At 154p, the shares provide a prospective yield of 2.7 per cent.

Noble also has a numismatic adviser arrangement, and 16 per cent shareholding in global collectable coin firm Avarae Global Coins, also traded on AIM. Continued investment in rare and high-quality coins helped Avarae report a tenfold hike in sales to £923,000 in the six months to September. However, of more interest is the last reported NAV of £9.8 million, or 12.6p a share – a huge variance from the current market price of 8.75p.