I have plans to initiate a position in regard to stocks mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from subscribers to Premium Membership). I have no business relationship with any company whose stock is mentioned in this article.
My daily sifting through the garbage continues with Mallett Plc (LSE: MAE), a global luxury retailer “specialising in the finest pieces of furniture and works of art, primarily from the 18(th) century and Regency periods.”
Mallett’s half yearly report published 15 August 2013 shows current assets are £17,617,000, total liabilities are £4,534,000 equating to a net current asset value of £13,083,00.
Today’s (28 May 2014) market cap of £8,210,00 leaves a 38% discount to NCAV.
Mallett is a stock correlated to how wealthy people feel as opposed to how wealthy they actually are as with all luxury goods brands.
The psychology of this correlation can be seen in it’s long term price chart:
Long Term Price Chart Of Mallett
What’s troubling about an asset-based valuation is that Mallett have been slowly destroying tangible assets over a period of years from 134 pence per share in 2009 down to 100 pence per share in 2013.
Similarly the current ratio was 4.51 in 2009 and in 2013 it has reduced somewhat to 3.20. Also the share price has not traded above it’s current tangible asset value since June 2008, it’s cash flow has been choppy, profitability evenly so.
In a recent statement dated 19 May 2014 Mallett conceded that current sales are slower than last year:
our trading pattern is becoming increasingly volatile with periods of lower value trading followed by shorter vigorous periods of premium trading
we have a net cash position following the receipt of proceeds from the sale of our freehold property in Clapham, London in February. A resolution is being proposed at our AGM on 27(th) May to pay a special dividend to shareholders of 12.7 pence per share, to return the majority of the proceeds from the sale to shareholders. If the resolution is passed, the dividend, totalling GBP1.75m, will be paid on 13(th) June 2014.
The decision to pay the special dividend has been granted today.
This is a cigar butt stock pure and simple.
Bottom line is that management have stopped the rot by returning to a net cash position by selling their property and tangible asset erosion seems to have taken a back seat.
Although recent statements are not really music to an investor’s ears Mallett is more compelling than recent coverage and is a darn sight easier to value.
Long on the open tomorrow 0800 GMT, 5% position size with a review of the position set for a day before the special dividend (12th June), initial target 85p
All the best
To view current holdings click here.
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Image: Yahoo Finance: Mallett Plc