Bought these the other day on results day and was certainly taken aback by their fantastic growth over the period focussing in on Asia. Ive copied a report from Killik Brokers who sum up the potential far better than I ever could.

Take note of the last Paragraph.

CROSBY CAPITAL Final Results

We highlighted Crosby Capital last year as an interesting opportunity. Its rather complex business structure makes it difficult to analyse and its introduction to the AIM market through a reverse takeover of a cash shell meant that investors have gradually got to know the story over the past twelve months. Nevertheless, it is fair to say that from a placing price of 15p, the rise to 29p suggests the action is underway.

The group is headed by two well known investment bankers including Simon Fry who was former head of Nomura in structured finance alongside Guy Hands. The company was established to house their interests in handling transactions in the Asian region and late last year, the first fruits were delivered with the injection of its oil and gas agreement with Medco which provided them with a carried interest over disposal proceeds above a $120 million benchmark (the expectation is for a sum significantly higher which will provide Lodore Resources with a useful cash injection). Crosby, having placed down 70 million Lodore shares for 10 million gross (5 million net to Crosby), retains 214 million shares worth around 32 million or around 15p per share.

Partially reflecting this disposal, Crosby has reflected part of the profit as it announces for the year to December 31, 2004, it generated a profit of $34 million on $55 million of revenue. The company states that the actual profit to be recognized on the Lodore transaction will be $82 million or 42 million. The total value of Crosby at 29p (new high up 3p) is 60 million. Simon Fry alludes to a healthy pipeline of new merchant banking opportunities coming through and hopes to conclude some this year.

For investors, it appears one is paying a modest premium over current assets for potential significant further upside. ENDS.

DYOR

Speculative punt, that could be a winner.

cheers GF.







Powered by IST's

Now read the Durlacher note - thanks tallsiii.

Very impressive - on a p/e of 4 and with higher profits forecast for 2005 than 2004 the future looks very good. I see we're in for a probable dividend too - gets even better in my book.

proptrade - thanks for your info

Yep, I guess a large sell is being worked through today but the two 100ks at 51.5 and 49 look like buys to me.

Cheers, Madison

Madison,, yes i thought they looked like buys,if a big sell is being worked through is this what is holding the price back..JB.

Could I have a copy of the note please tallsiii. Been trying to get on the site all day. Going dead slow now aswell.

cheers GF.

Ah well came back at the end on a red day all round. At least its cheaper now. Historic /rolling P/E 6.

cheers GF.

I agree the with you madison the resistance as 50p must have a big seller. 50p is a nice round figure and does show some significant gains for anyone that got in about a month ago. Hopefully that will have worked through the market tomorrow and we can move onwards and upwards.

Cheers
TS

Havent got a copy of the Broker note yet, but found it and lifted it from the free SC board.................................................

Broker note. Absolutely fantastic!

Durlacher

Crosby Capital

SECTOR
PRICE
12 April 2005
Speciality finance
41p
CSB12/4/05AMJJASONDJFMA(p) 15202530354045Source: DATASTREAM
CODE
CSB
MARKET
AIM
52-WEEK HIGH/LOW
41.8p - 17.5p
MARKET CAPITALISATION
97m
SHARES IN ISSUE
235.6m
NET DEBT / CASH
$5m
ANALYST
David Pannell
0207 458 5523
david.pannell@durlacher.com
SALES
020 7458 5537
DURLACHER LIMITED
Moorgate Hall, 155 Moorgate
London EC2M 6XB

KEY DATA

Year end December - US$m
12/03A
12/04A
12/05E

Turnover $m
3.2
55.2
67.5

Operating profit $m
(3.7)
44.3
48.4

PBT $m
(3.7)
44.3
49.5

Profit attributable to shareholders $m
(3.7)
39.6
42.3

Tax (%)
0
0
16%

EPS diluted c
(1.8)
17.8
16.7

Change in EPS %
-
1,070
(6.4)

DPS c
-
-
2.1

Change in DPS %
-
-
-

PER x
-
4.3
4.6

Yield %
-
-
2.8%

Durlacher is nominated adviser and broker to Crosby Capital Partners

The eye of the Asian tiger

Since we initiated coverage of Crosby, the management team has clearly demonstrated its ability to generate significant value. One of Crosbys deals (Sunov), the acquisition and subsequent sale of various oil and gas interests, enabled the group to book $38.4m profit in 2004 with the very real probability that more will be recognised in 2005.
Having completed this deal the stage is set for further activity. Crosby's ability to identify undervalued assets and execute complex transactions, using little capital from its own balance sheet, has the potential to produce spectacular returns. We believe the recently announced IB Daiwa transaction could be another deal with returns that match the Sunov trade.
Crosby's asset and wealth management businesses are progressing, with Crosby Wealth Management launched operationally in Q2 2005. Furthermore, we expect Crosby may acquire an asset manager, during 2005, in order to accelerate the pace of development.
Crosby's recent results were excellent with revenues rising to $55.2m, largely on the back of the Lodore sale and PBT of $44.3m.
Looking forward, the group is trading on a historic and prospective PE of only 4x, has approximately 50m of net assets and we expect a maiden dividend in H2 offering a yield of 2.8%.
Crosby Capital | CSB 41p

1. Background

Crosby is an independent investment banking and asset management business with an Asian focus. It was formed in the early 1980s and grew into a well established emerging markets stockbroking business. In the mid 1990s, the operating businesses, but not the holding company, were sold to SociGale. By 2001, the surviving business had contracted to having only a small presence and a handful of staff in South East Asia, although the Crosby name was still well known.
Following its acquisition by Techpacific, in early 2002, Crosby began to expand again. In May 2004, Crosby reversed into an AIM shell and thereby obtained its listing.
Crosby has two principal activities (which are detailed below):
Merchant banking - $54m of revenue in 2004 (virtually all Sunov related).
Asset management - $1m of revenue in 2004.

2. Merchant banking

Crosby's merchant banking strategy is as follows:
Identify undervalued assets, for example those which are hidden by a complex corporate or capital structure. Crosby is comfortable working across a range of industries and geographies. It proactively sources deals using its own network of contacts, particularly in Asia Pacific.
Invest significant sums from its own balance sheet on due diligence and deal structuring. In the case of Novus Crosby's initial costs were $2m.
Determine a financial restructuring strategy, for example via a buy-out.
Purchase the assets using pre-sales or other non-recourse finance.
Crosby's approach has a number of advantages:
Scaleable particularly as it now has an effective investors club willing to back its deals.
Requires little capital from Crosby's balance sheet.
Low levels of competition for deals - because they are complex and thus more difficult to complete.
Higher returns particularly versus comparable private equity.
Since our last substantial research note, in September 2004, Crosby has demonstrated, through two significant deals, the value its investment banking activities can generate.
2 Durlacher 2005
41p Crosby Capital | CSB

Lodore deal

In November 2003, Sunov Petroleum, majority owned by Crosby Capital Partners, tried to acquire the Australian listed Novus. Crosby had identified that Novus owned an unfocused mix of oil and gas assets in Indonesia, Australia, the Middle East, the USA and Pakistan. This complex corporate structure and geographic diversity meant Novus was undervalued.
Crosby eventually partnered with a third party to acquire Novus. In the process, through its Sunov subsidiary, it acquired the economic interests to various oil and gas assets in Pakistan, the Middle East and Pakistan.
Crosby's US interests were sold to AIM listed Lodore in January 2005. At the time, the transaction valued Crosby's interests at $82.4m of which only $38.4m was recognised in the 2004 accounts. Crosby expects to sell its Pakistan and Middle Eastern assets during 2005. We estimate they are worth around $20m.

IB Daiwa

In early April 2005 Crosby acquired, for nil consideration, 107m warrants in a Japanese trading company IB Daiwa. This represents approximately a third of Daiwa's fully diluted share capital.
The intention is to transform IB Daiwa from a trading company into a financial services company managed by Crosby, and focusing on property, fund management, China and restructuring. The latter is becoming increasingly important as the Japanese are now ready to accept Western style financial restructuring.
Crosby intends to exercise its warrants when it has obtained management control of IB Daiwa. At their current level this would cost Crosby around $30m. However, the share price has already begun to rise with the news that Crosby is taking control, and there is a good chance of its warrants being the money when they get control.
Crosby has a strong pipeline of potential future deals. However, by their nature only a small number are executed, and risks are high. For example, the group has been pursuing an Indonesian bank, and this deal has been put on hold after the government changed recently.
3
Crosby Capital | CSB 41p

3. Asset management

The fund management division now manages over $400m, in both private equity and Government sponsored funds. The business contributed $1m to Crosbys revenue for the full year of 2004. The main funds are:
CORO Voltin Fund a Korean government sponsored SME fund.
Crosby Dragon Fund invests in Pakistani debt and equities.
Crosby China Chips Fund investing in legal person shares of PRC companies listed on H and A share markets.
Crosby Buy-Out Funds This family of funds is exploring MBO and LBO opportunities in Singapore, Philippines and Indonesia.
The division has formed a joint venture with the Japan Asia Investment Company Limited, an established fund management group listed in Japan, to manage a fund focused on mid-cap pre IPO opportunities in China.
Crosby is also building an independent Asian private banking and wealth management operation (Crosby Wealth Management). This is being led by Paul Giles who is a seasoned private banker in the region. He has recruited a number of high profile managers. The business has been funded by external capital with Crosby retaining the largest shareholding (56%). Credit Suisse has been retained to provide infrastructure and custodian services to its clients. It is expected to be fully operational in Q3 2005. Its value is not fully reflected in Crosby's earnings or balance sheet.
Crosby has stated that it is looking to build its fund management activities via acquisition.

4. Corporate finance

Crosby's corporate finance activities are focused on China. In 2004, Crosby placed these in SBI Crosby, a 50:50 joint venture with a subsidiary of Softbank and E2 Capital. This partnership gives the 17 person corporate finance team access to distribution and research capabilities whilst continuing to provide Crosby with a gateway to the opportunities that are currently available in China.
Since the formation of the joint venture these activities have not been consolidated and therefore its value is not fully reflected in Crosbys earnings and balance sheet.
4 Durlacher 2005
41p Crosby Capital | CSB

5. Financials

Crosby recently announced a strong set of 2004 results, with revenue increasing to $55.2m from $3m in 2003. This was primarily driven by the Lodore disposal, which made up 70% of this revenue or $38.4m.
Crosbys adjusted PBT for the full year was $44.3m, with an EPS of 17.8c. Stripping out the Lodore transaction gives Crosby an underlying revenue figure of $16.8m, a growth of 560% over 2003. Underlying costs remained broadly static at $8.9m, giving an adjusted PBT of $7.9m compared to a loss of $3.7m in 2003.
Looking forward, we expect asset management revenues to grow 600% in 2005, to $6.5m, largely driven by the launch of Crosby Wealth Management. Merchant banking revenues should increase by 7% to $55.0m. The latter reflects recognition of the outstanding Lodore transaction and our assumption that value from at least one further deal will be recognised.
The launch of Crosby Wealth Management and the expansion of the Merchant Banking Division means administration costs will rise sharply during 2005 to $18.9m. The cost income ratio will rise to a more sustainable 31% after the exceptionally low 19% in 2004.
We are expecting a $1m contribution from associates, in 2005, principally SBI Crosby through which Crosby's corporate finance activities in China operate. In addition, a $0.5m contribution from minorities is expected from Crosby Wealth Management.

6. Valuation

Crosby's market capitalisation is approximately 97m and it has no debt. From a number of different angles the share price looks to have plenty of upside.

NAV

Crosby's stake in Lodore (at 15p per share) is worth around 43m. In addition, Crosby owns the ex Novus Middle Eastern and Pakistan interests, which are worth around 10m. Therefore, the Novus deal represents around 53m of value (or 55% of Crosby's market capitalisation).
The potential value of Crosby Wealth Management, SBI Crosby (the JV for Crosby's corporate finance activities in China) and IB Daiwa are not yet fully reflected in the balance sheet, and they have significant upside potential, particularly the latter. In addition, Crosby had $5m of cash at December 2004.

Earnings based

We believe the Novus deal demonstrates the ability of Crosby to generate high quality revenue streams. Therefore, with a historic and prospective PE of 4-5x the shares look cheap.
Crosby has also stated its intention to pay a dividend following the realisation of its Lodore holdings. We have pencilled in 2.1c per share to be announced with the prelims.
5
Crosby Capital | CSB 41p
Profit & loss forecasts ($m)
12/03A
12/04A
12/05E

Revenue
3.2
55.2
67.5

Admin expenses
6.9
10.7
18.9

Cost/income ratio %
218.0
19.4
28.0

Depreciation
(0.2)
(0.2)
(0.2)

Operating profit
(3.7)
44.3
48.4

Associates
(0.0)
0.0
1.0

Net interest
0.0
0.0
0.1

PBT adjusted
(3.7)
44.3
49.5

Taxation
0.0
0
(7.7)

Profit after tax
(3.7)
44.3
41.8

Minorities
0.0
(4.7)
0.5

Profit attributable to shareholders
(3.7)
39.6
42.3

Ordinary dividends
0.0
0.0
(5.0)

Retained earnings
(3.7)
39.6
37.3

Earnings data
12/03A
12/04A
12/05E

Shares in issue m
200.0
222.0
235.6

Shares fully diluted m
200.0
222.0
253.5

Adj EPS p
(1.8)
17.9
18.0

Diluted EPS p
(1.8)
17.8
16.7

Adj EPS diluted % change
6.6
(1,070.6%)
-0.9%

Metrics
12/03A
12/04A
12/05E

Tax rate
0%
0%
16%

PE adjusted
(43.9)
4.3
4.3

PE - Fully diluted
(41.9)
4.3
4.6

Dividend per share
0.0
0.0
2.1

Dividend yield
0.0%
0.0%
2.8%



Cash flow $m
12/03A
12/04E

Cash from operations
1.0
-5.9

Tax
0.0
0.0

Investing activities
0.0
0.1

Financing activities
0.0
4.2

Change in cash and equivalents
0.9
-1.6

Exchange rate movements
0.0
0.0

Net cash/(Debt) $m
7.0
5.4

cheers GF.

Having completed this deal the stage is set for further activity. Crosby's ability to identify undervalued assets and execute complex transactions, using little capital from its own balance sheet, has the potential to produce spectacular returns. We believe the recently announced IB Daiwa transaction could be another deal with returns that match the Sunov trade. NICE.

cheers GF.

If you look at the new Broker note this is nothing but a STRONG BUY. Forward P/E of 4 and historic/rolling P/E of 6 and a fantastic growth share at that.

cheers GF.

Hope so GF another bad start all round today..JB..

The Yanks will drag us out of it Jimmy in the next couple of days.

cheers GF.

A 50,000 buy just come in.

cheers GF.

Thats good ,come on start buying!!

Yup come on get buying them. LOL.

cheers Gf.

Still banking on the yanks to pull this market around.

cheers GF.

Yes here's to a good next week..JB..

Hi Jimmy,

well Tom Winnifrith is very bullish on the future market tonight, he says dont let the TA big guns get you down and predict how things will go.

cheers GF.

A bit down today, as all the markets are down lets hope some positives from the other side of the atlantic.every thing is down,feel like selling every thing and wait for the dust to settle,its very hard call at the moment.But we all will weather the storm,whats your view goldfinger.

I just thought the same ateeq180 , but ive been here before and it always comes back,,does'nt it?? yes whats your view GF..JB..

Just to sit and hold tight but dont Buy anything until we see at least two good days on the trot from the US. I think its just a sharp short blick reminding us all not to get too greedy. For certain the momentum play market is over. Techs with no asset backing I beleive will take even a further whack.

Perhaphs the White Nile saga was the sign that was telling us we were getting too far in front of ourselves, a bit like Last Minute.com back in 2000.

cheers GF.

I have taken a poundering last year when i was in a similar situation,which i did regret at the end as it was a panic selling,but this time i keep on saying to my self, not this time,and i think the best thing will be to wait,it will be nice to see the blue again.