Dowgate Capital (DGT) are sitting in the middle of a goldmine! This company through their sole trading arm City Financial Associates are looking to take full advantage of the "booming" AIM market this year. Dowgate provide NOMAD (NOMinated ADvisor) services to AIM companies and also have full Corporate Broker status which means that they can fund placements on behalf of the companies they represent.

Website: www.cityfin.co.uk

On first sight, the fact that Dowgate exist in the often veiled financial services sector makes you think twice about investing in company such as this because it would be impossible to understand what they were doing - however, think again! DGT bring new companies to the AIM (Alternative Investment Market). For each new company "floated" on AIM, they take arrangement fees when acting as NOMAD. After the company is launched then for a nice steady earner DGT get another healthy chunk of cash every year for looking after them (note that all AIM companies must have a nominated adviser - thereby securing a ready source of recurring income). Because DGT also act as a Corporate broker they can get a very healthy percentage for arranging placement of shares with insititutions before a new company floats. In addition, because placements come outside the sphere of yearly NOMAD work, they can also gain healthy percentages of placements which companies may need to make throughout the year when they need a quick injection of cash to speed growth. Current NOMADships: 28 companies represented (gives recurring income of approx 480,000 per year) Current on-going Brokerage agreements: 19 companies (income depends on placements) For flotations, depending on the size of a company, fees charged will be anything from 50,000 to 100,000+ For placements (the real earner), DGT get anything from 3% to around 12% of the TOTAL AMOUNT RAISED - For example a new company raising 3M though a placement will earn DGT anything from 90,000 to 360,000 ! These figures are indicative as actual deals all differ due to circumstances and DGT sometimes take payment in shares - they still have a tasty chunk of Setstone shares and when this Russian exploration company comes back to AIM, predictions are that the share price will rocket. Note that the amount that this little company can earn in fees is huge and every new deal that comes through we know will contribute another healthy chunk into the bottom line. The good news with every new floatation means that it's another chunk of recurring revenue which could go on for years, with DGT having to do very little. New clients gained in 2005 are: Mediazest (NOMAD & broker) Elite Strategies (NOMAD) Process Handling (NOMAD) Poland Investment Fund (NOMAD) Nanotech Energy (NOMAD & broker) Archimedia Ventures (NOMAD & broker) Red Leopard Holdings (NOMAD) Alba Mineral Resources (NOMAD & broker) Intandem Films (NOMAD & broker) Motive Television (NOMAD) IncaGold (NOMAD) Sportswinbet (NOMAD & Broker) Infoscreen Networks (NOMAD & Broker) Mark Kingsley (NOMAD & Broker) Croatia Ventures (NOMAD & Broker) Pantheon Leisure (NOMAD) Firenze Ventures (Ofex Advisor) FlightStore Group (NOMAD & Broker) Euro Capital Projects (NOMAD) Pearl Street Holdings (NOMAD) Worldwide Natural Resources (Ofex Advisor) Dovedale Ventures (Ofex Advisor) Other 2005 work completed:Neptune-Calculus VCT offer for subs of up to 12 million Advisory work for TGM on London Bus disposal for 20.4M Advisory work for Creightons on property disposal Advisory work for Hampton Trust on company restructuring Advisory work for Interbulk Investments on acquisition of Inbulk Advisory work for Fundamental-e Investments on two disposals Advisory work for Designer Vision re: Design Rights against Centurion Electronics Click Here for fundamentals and profit projections.

Eric - sorry to hear about your BT problems, but better not get get me started on Telewest!

I agree with you about the chart looking pretty unsupported above .4p (brief toehold at .51p), however I am still awaiting a challenge to my theory that SP's were marked down across a number of trading stocks at the end of this week as a defence against T20 merchants by the MMs. This, with the usual sell on fact brigade, prevented us holding the 0.69p support level of the recent downward triangle. Ending the week above Friday's intraday lows gives some small comfort for next week. But we should probably be prepared for some volatility to the down side over the next few weeks.


I have looked briefly at why turnover at 1,179,000 was so much lower than my own estimates of 1,276,625. There are four separate elements to consider:-

1) I have assumed arbitrarily that there were 150,000 of rechargeable expenses contained in the turnover - which they included on both sides and I excluded on both sides - so their turnover in my terms would have been only 1,029,000 - a difference of 247,625 to explain.

2) Retainers - my figures are taken from last year's accounts and the library of transactions for the most part with estimates of 17.5k pa for NOMAD and 22.5k pa for NOMAD/Broker where not explicitly stated. If these latter were overstated by average 2.5k each unrevealed new client, then that would account for only 1,250 of the difference.

3) Transaction fees for IPO's/placings were taken from the library where available or otherwise estimated. These latter totalled 160,000 and could have been overstated by, say, 31,375.

4) Fees for other advice in connection with disposals or acquisitions. The biggest estimated fee was 225,000 for TGM's disposal - a subject of much discussion at the time - perhaps this was a low as 50,000. Other estimates totalled 100,000 over 4 equal deals - maybe another 40,000 adrift. Total 215,000.

This is pretty much guess work to fit the facts which, if accurate, continue to surprise me except for TGM which we may all have been too optimtistic about (I myself started with a 50k fee until persuaded otherwise).

Perhaps rechargeables were lower and thus the true difference in earnings was less. If this was the case then bonus salaries were almost certainly higher than my guess of 148,000 by the same amount. I am still surprised (and not a little disappointed) by the size of the overhead after being promised last year that it would be substantially restrained - I did not take that to mean merely non-repeat of large pay-offs to departing management.

Perhaps one element of explanation I am missing is, as Eric mentions, timing of fees being booked. I was careful to accurately phase retainers over 4 quarters, but some of the larger transaction fees may not be booked until H2 (TGM??). This was certainly reported as a factor in last year's H2 rolling over into this year's H1.

Anyway, fees income about 250k less and overheads (net of recharges) nearly 150k more led to net profit 400k less than I estimated - only a 140% error. I guess I could get a well-paid job at Evolution if I played my cards right - lol! Small comfort is the fact that our future predictions should be rather more realistic.

So far for H2, I have recorded 245,250 of retainers for clients gained up to end of H1, together with 77,500 for two new NOMAD/Broker clients and FIE's 800k fund-raising - perhaps a little generous in light of history - almost a third of our target to repeat H1. I will continue to add new deals as they become known, in respect of which I would be very grateful for everyone posting any news on this thread.

Eric - I think you mean EPS of 0.047p for H1. Cautiously adding another 200k for H2 gives full year EPS of 0.079p which I think supports an SP of 0.95p at a modest PE of 12. If we achieve the same again for H2, perhaps we can expect an SP nearer 1.12p, so we might get our 1p party after all (where should it be - the best restaurant in Dowgate? is there one?).

As pth/og(?) has pointed out, we now have a rarity on our hands - a profitable and seemingly stable AIM company. The risk factor usually associated with companies of this size has been enormously reduced to a low risk category IMHO - so perhaps the rewards will commensurately be justifiably not quite so exciting as might have been hoped. However, no reason not to expect good steady above average returns over the next year or so.

Eric, what would your criteria be for accumulating more stock in this one currently?

sd

Eric, `ere`s another Oirish one. last one, as we must concentrate on pushing DGT up the ladder of success !!
Two Irishmen in the Wild West who, on arrived in Dodge City, noticed a sign in shop window, declaring " Indian scalps - $10 each". They call into the shop and are given rifles, knives and ammunition and told that for every Red Indian scalp they bring back, they will be paid $10 each. So, off to the desert, where they find an oasis and hide behind a rock, laying in waiting until a Red Indian comes along. Sure enough, 10 minutes later an Indian brave approaches on his horse and dismounts to drink at the oasis. Paddy shoots the Indian brave and Murphy goes to take his scalp. Just as Murphy has his knife at the ready, he hears lou whelping and Paddy looks up to see Chief Geronimo and some 100,000 braves on the ridge beyond. Paddy declares,
"Don`t look now, Murphy, but I think we are just about to become millionaires" !!! Mind you, that`s what we all think with DGT ??
good luck and bestest

Good Afternoon campers.
Back from hols at last.
Well I would be lying if I said that I am not disapointed, I am however prepared to hold.
This is a company in profit and with money in the bank.
I am sick of losing money on impulse selling on sentiment.
This company now has a solid foundation upon which to build.
TR has done much is 6 months, I'll still be here for the finals in March, until than here's to one or two pleasent suprises on the way.
Regards
Stevie

Well done sd and snakey - serious and light-hearted stuff, respectively.

The query re the future of sp. The correction is due to, firstly, profit-taking and, secondly, some disappointment that results were lower than expected. If the expectation had not been higher then, as sd says, the results would have been applauded and the sp would have risen although from a lower base. Now, DGT is too small to interest the Evolution's of this world - Hemscott still show the sp as 0.4p. Lets look at the figures:

Turnover for last three six month periods: 510K, 815K, 1179K. Rising trend slightly better than a straight line. Suggests second half of 1500K making 2680k for year.

Operating costs for same periods: 609K, 1105K, 898K. Second half of last year swollen with pay-offs. Comparing first half figures suggests that revenue is increasing twice as fast as overheads. Assuming twice would make overheads for second half of 1100k and pbt of 400K making 690K for year.

This is about 1.1p per share. sd suggests projected pe of 12 but lets say 10 which gives an sp of 1.1p. If these figures are approximately right then the pe should move to say 15 and the sp to 1.65p.

The difficulty with DGT, of course, is to be convinced that the sp will find an appropriate level in the short term. Even if the second half only matched the first half then the share would be ridiculously cheap. The cap at 0.625p is merely 4m. I think it would have moved to 6m on the interims if the expectations had not been built-up, leading to some selling pressure. The problem is that the share is unlikely to attract the institutions, even the small-cap funds. If you are prepared to buy now and hold until march then you should, I believe, double your money. Most of us who contribute to this bb are medium term holders so that there should be an on-going commentary on business won. Another pointers is whether any new fee-earners are recruited because fees per professional should be a consistent measure. My view is that this is a little gem. I find Rawlinson, as a working CEO, very impressive and professional. Buy management is a sensible principle. I would also be confident that he will make good decisions on the expansion of the company so that the longer term growth potential is also attractive.

Eric

Pleased to see you all still enthusiatic about DGT and it will remain on my watchlist and I will probably buy back in later. I have my eye on a few others so took my profit to fund my next buys rather than have a 3rd marginal or paper-loss stock waiting for the next 3-6months. I just think that 500k was in the sp and thats why it dropped but you should see 1p+ in run up to full year results in March.
Good Luck folks.

andysmith: You could be right. However, I think the sp can rise on one or some fo the following: publicity through Shares (that I may initiate myself, depending on whether there is a report on Thursday; on-going analysis here and elsewhere; news re additional staff caused by demand; possible acquisition - more likely next year but, if an opportunity presented itself, they would need the sp higher to fund it probably and that would mean updated figures. The cap is far too low at present price (my argument above) but I accept it does probably need some external to move the sp.

Eric

Also we need to move from the dog (!) days of August back into full business mode for the rest of the year, both in terms of investor sentiment and attention and in terms of DGT showing us a bit more new business confirmed.

I will research suitable hostelries in the ward of Dowgate to pass the time until September 5!

sd

Will hold out on my holding for 2 years... shame it did not hip .9-1p level (as desired) however a 290k is very sound considering they were at a loss last year!

Lets see them do some business now and help us build our pension funds :)

sidtrix - the profit was 290K, rather than 250K - even more sound :-)

Sorry was just putting in the approx amount... edited now!

whoops!

is it worth averaging down again?

It's getting very close to that point - the head and shoulders is almost complete.

what on earth has caused this sudden landslide? I can only speculate that there is potential bad news in the pipeline?

Well, I guess the MMs have marked down the price until the sell on news brigade have done their worst. There have been a number of sterady sells today including the 2million showing as a buy (delayed from one hour earlier when it was clearly a sell).

Just have to sit and wait it out. Around the 0.48-0.54p level I expect buyers to re-emerge - hopefully TR among them, possibly me.

sd

I think we're going to see a last gasp dip first thing tomorrow and then some serious buying action. Fundamentals say grossly oversold, TA says that we're at the end of this downward cycle and the trades today are showing buying confidence returning in part.

I note that the sells after results were all relatively small apart from the obvious couple of T-trades, the MMs are doing well with the clear out.

DGT posts a respectable profit, costs have only increased slightly and as a percentage of turnover (which doubled!) are well down compared to H1 2004 and everyone sells!

It beggars belief. All I can assume is that too many got carried away with our (less than official) estimates, bought in without thinking and then sold out without thinking too (doh!).

All those who sold will soon be looking at the price totally mystified as to why it should suddenly bounce back and rocket up in the right direction. It's all in the figures which are excellent compared to previous years and the prospects for H2 remain healthy as TR has confirmed that he is "confident as to the outlook for the second half".

Note, not "cautiously optimistic" or "optimisitic" or "looking to achieve satisfactory results for the second half". That says a lot in my book and suggests that there are some tasty transactions already in progress and/or stacked up in the order book to keep the team very busy for the rest of the year.

Let the buying commence...

og - Looks like movements this morning will bear out your comments.

corehard - yes the buyers are back and the sellers are starting to peter out now.

Any large buying at this stage will shift the price up very quickly by the looks of things, as it did appear that the MMs were slightly overzealous in marking the price down rapidly to get lots of tasty spread from the sellers.

It looks as though we're now in for a steady climb back up, with more substantial hikes in price as details of new transactions completed for H2 come to light.

just bought another 400k at best, showing .62 contract shows .59 sign of weakness? Chart has the look and feel of a bounce to .65-.70. Im a bit of a newbie as far as sub-penny stuff is concerned erratic price vacilations etc. If I have to average down again will probably have a notifiable interest!

rawsthornebj001 - an excellent time to buy IMHO.

Based on pure fundamentals the share price should be around the 0.70p mark which means that the recent selling has been well overdone.

Technically, we've just bounced back up from oversold territory on the RSI and stochs are converging into the next cross. The head and shoulders formation has completed with a higher low which suggests continuation of the longer term upward trend.

MMs are happy to deal within the spread if it means that they're going to get plenty of customers and still make a decent profit - not a sign of weakness.

Onward and upward!