Scholium Group – a chance to buy into a ‘rare’ opportunity
Today’s profile features a £5m capitalised AIM-quoted company whose shares are trading at a near 50% discount to their net asset value.
It is an acknowledged leader in its world market, has over £1m cash in the bank and is trading profitably.
An astute trader
The New Bond Street-based Scholium Group (LON:SCHO) is engaged in the business of dealing in rare books, fine art and collectibles.
Most of its business is transacted as a dealer – buying, owning and selling items on its own account or together with third parties who also deal as principals.
In addition, the company holds auctions of both its own stock and on behalf of others.
Importantly the group maintains value from owning its stock and generates value through its expertise, astute buying and the subsequent profitable sale of such stock.
It operates through three main businesses – Shapero Rare Books, Scholium Trading and Mayfair Philatelics.
Shapero, which is the main business was founded in 1979. It is a leading international dealer in rare and collectible books and works on paper. Its special expertise is in Natural History, Illustrated, Travel and Exploration, as well as in Literature.
Under the Shapero Modern brand it trades in modern and contemporary prints and limited editions by established artists.
The Trading side focuses on trading in works of art in the wider art market using its own capital.
Mayfair Philatelics deals in and regularly auctions British and Commonwealth stamps, on its own account and on behalf of third parties, through its London and Lingfield, Sussex-based venues.
There are some 13.6m shares in issue.
Larger holders include Thomas Jennings, NED, (21.6%), Livingbridge EP (14.7%), Gresham House Asset Management (13.2%), Peter Gyllenhammar (13.0%), Philip Blackwell, NED, (11.2%), Bateman Street Investments (11.0%), Rampart Capital Spc (4.21%), Bernard Shapero (2.38%), JM Finn & Co (2.02%), and Hargreaves Lansdown Asset Management (1.51%).
Recent interim results show strong recovery
Last Wednesday the group announced its interim results to end September. They were very encouraging.
On a 35% increase in sales at £4.20m, the company turned around from a £158,000 loss to a £135,000 profit.
Its inventories improved to £8.89m, while its net asset value came out at 68.8p per share.
The recently appointed Chairman of the group, David Harland, informed shareholders that
“We are pleased that the group has traded profitably, despite the cancellation of books and other trade fairs and the enforced closure of the shop for some of the period. The group has recovered well from the restrictions imposed by Covid 19.
The group remains focussed on maximising sales through online and other channels as well as its premises and is welcoming the return to London of visitors from overseas, in particular the United States.”
It is continuing to focus its efforts on its various online platforms, as well as maintaining contact with clients remotely via both email and telephone. With clients now able to travel with fewer restrictions, that is now being augmented with face-to-face contact in the group's premises and at trade fairs.
Looking forward, the group is viewing its trading for the second half of the year with optimism.
Nick Spoliar, analyst at WH Ireland the group’s NOMAD, noted the interims displayed that the group had just reported its best-ever six months figures. He also stated that it was trading well both online and offline.
Furthermore, he remarked upon it proving to be cash-generative and showing signs of a full and well-embedded recovery. Being second half weighted the group is clearly pointing towards increased profitability in the full year.
His conclusion was that the discount to the NAV appears clearly overdone.
We obviously need to see more good results to come from the group. However, it is certainly going in the right direction.
The market in the group’s shares is both small and fairly tight, but if you can manage to tuck a few away as they become available within your set price range, I do believe that this stock is a ‘rare’ purchase at the current 36p.
I now set a Target Price of 45p.