INTRODUCTION
In the news: Gemfields
Well, hasn’t it been a poor 2H15 so far in the natural resources space? The mood is low. Even the early-year star Gemfields (LON:GEM) has taken a hit, with the share price falling from a high of 69p on 12 June to 45p this morning. While obviously there’s been some profit taking, news out of the diamond sector isn’t exactly helping. Still, this hasn’t stopped the good news coming out of the company; that’s the advantage of having a luxury goods company tagged on to your mining operations. Having bought Fabergé from Unilever, this brand’s renaissance is going from strength to strength. Until recently, the Fabergé name was being used to sell the, ahem, ‘great smell of Brut’ along with a lavatory disinfectant. Could the brand rediscover its position as jeweller to both the stars and the Tsars?
It seems Gemfields is doing a good job. I am told by people in the know that the real profit driver for luxury goods brands is watches, and Fabergé won a prize at the recent Grand Prix d’Horlogerie de Geneve awards. These are described as the ‘Oscars’™ of the watch industry. Fabergé won the ‘Ladies Hi-Mechanical’ award with its Lady Compliquee Peacock watch. Very nice it is too. I was thinking about buying one for Mrs Williams, but the website doesn’t quote any prices. If you need to ask, you can’t afford it, and I’m a natural resources broker. I need to ask.
The value Fabergé is prescribed by the market to Gemfields is difficult to quantify. The problem with Gemfields’ research reports is that they are exclusively written by mining analysts. When will one of the big brokers deploy one of their luxury goods analysts to take a look? It really looks like a valuation mismatch to me.
Any article on Gemfields in a newspaper or by a competitor is now accompanied by a picture of its brand ambassador. We’re way past that phase here and we’ll just concentrate on our subject. Thus, below we have included a totally random picture of someone wearing a watch.