John Lee
© Financial Times

My investment approach is based on a belief that “value” always comes through in the end – although I quip that, with some companies, many shareholders will have died waiting! Sometimes it can feel as if I am creating a portfolio for my future grandchildren.

Usually, my investment judgment is based upon relative dividend yields, price/earnings (p/e) ratios, price/earnings growth (PEG) ratios, market expectations, etc. But with property companies, a value assessment is more easily made with professionally certified net asset values – hence my earlier purchases of Daejan and Town Centre at big discounts.

Often, however, there is a clear differential between stock market capitalisation and what a trade buyer or competitor might pay – thus some surprisingly high premiums are seen on takeover bids. I have always felt, for example, that family-controlled flavours/fragrances manufacturer Treatt – my largest holding – is “worth” significantly more than its market capitalisation, although it is determinedly independent.

Occasionally, a glaring anomaly arises particularly with a small PLC that falls below most investors’ and analysts’ radar: I believe Aim-quoted Christie Group to be a classic example.

I have been “aboard” for ten years, buying first in the mid-30ps in 2002 and seeing them climb to a peak of 272p when pre-tax profits in double figures were reached. An expensive software venture then acted as a considerable drag, thankfully now terminated, and trading conditions in recent years have not been easy with dividends passed in 2009/2010.

However, Christie has steadily developed over the years and is highly regarded within its two principal sectors: professional business services, covering valuing, buying, selling, financing a wide variety of businesses in the leisure, care, retail sectors; and stocktaking and inventory systems and services.

Christie’s business services are provided from 14 offices in the UK and 13 abroad – having opened in Dubai last year and Dublin very recently – and helped it win Estates Gazette’s “Most Active UK Agent” award in the Leisure and Hotels category for a second year. Apart from disclosed clients such as Von Essen Hotels and Southern Cross, it does a substantial amount of work for banks, insurance companies etc, with no publicity. Most of its major competitors are now virtually all overseas-owned.

Christie’s stocktaking business – number one in the UK, number three in the world, with 11 offices and more than 1,000 employees – has roots going back to 1846. But new clients include Zara, Butlins, Tesco Pharmacy.

Total group revenue increased to £53m for 2011, split broadly equally between the two divisions. With directors and staff owning 65 per cent, marginal profitability and a recent dividend reduction, the shares have come back to 52p, giving a paltry £13m capitalisation. So I recently added more at 49p to my already sizeable holding. This year has reportedly started well and I expect the high operational gearing to build bottom line profitability.

I would suggest a trade buyer might value Christie at £1 for every pound of turnover – £50m-plus – or four times its present market valuation. But even a more conservative calculation makes a mockery of the present share price. Indeed, the group floated at 145p in 1988, when it was considerably smaller.

John Lee is an active private investor, writing about his own investments. He may have a financial interest in any of the companies, securities and trading strategies mentioned.

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