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Dowgate Capital - Capitalising on the booming AIM market (DGT)     

overgrowth - 09 Feb 2005 20:52

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.

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.
Chart.aspx?Provider=Intra&Code=DGT&Size=Chart.aspx?Provider=EODIntra&Code=DGT&Si

Paulo2 - 07 Mar 2006 09:50 - 2133 of 2787

Eric, did you get on to Shares mag about doing a piece on DGT? With the figures out I don't think I'll ever buy another issue if they don't give us a good write-up.

EWRobson - 07 Mar 2006 12:24 - 2134 of 2787

Paulo: as I mentioned on this thread, I decided to wait for this issue to see if they do a piece. If not I will write under the title 'Dowgate under the radar'. pth wrote a year ago when the cap. was 2.5m and that was there excuse for not giving coverage. I see their point because , if they made DGT a Play of the Week, then the market may not be able to cope with the demand and their readers would be cross. But they need to find a way of covering smaller cap shares. Is there another DGT out there, I say? One way, of course, is to publish reader's letters without a recommendation but giving the opportunity an airing.

Butane: thanks for that. I subscribe to t1ps but missed that one. Very balanced post and my views precisely. Interesting to see the price easin despite a preponderence of buying. Suggests that MMs topped up expecting a higher level of demand which hasn't yet materialised;just makes the Shares attitude mopre important. This ought to be the ideal conduit for this sort of investment analysis.

sd: you should be congratulated on the accuracy of your analysis. I thought you had undercooked it but forgot that dogs like raw bones: gives this board tremendous value and I will include that in my letter (if I need to write it). In one respect, I think your forecast is light though. You say 24 new clients instead of 20, yet the number of consultants is up from 4 to 6 or 50%. There should also be more of a trend to a higher average income; again as they come into larger companies radars. I also liked Daniel Stewart's point about fundraising. I suspect that they will raise funds directly for their smaller clients and use the established borker's for the larger ones. That way they will still get the referred business.

Everywhere you turn, the picture is positive. I might even start buying again myself! RIL need some opposition after all.

Eric

EWRobson - 07 Mar 2006 12:49 - 2135 of 2787

My post above was timed at 12.24. At 12.30, or thereabouts, all 4 MMs moved their prices up - I didn't know I commanded such respect! lol!

EWRobson - 07 Mar 2006 12:53 - 2136 of 2787

Motoring now! WINS tried to hold the tide but their stock was pciked up and they have gone to the back of the queue. Sorry, though, it wasn't me buying, just providing commentary!

EWRobson - 07 Mar 2006 12:55 - 2137 of 2787

Only SCAP and TEAM left on the offer at 0.9p. MMs clearly out of stock and the bulls in the ascendency! Have to go out now - hope that doesn't stop the market!

EWRobson - 07 Mar 2006 13:04 - 2138 of 2787

Now only WINS on the offer at 0.9p. Suspect someone is reading my posts and now replting: just buying the shares - don't blame you!

stockdog - 07 Mar 2006 13:42 - 2139 of 2787

Funny that, Eric - Could have sworn it was my analysis that had been leaked to the wider market this morning. Might have known it was yours!

That's perked me up a bit, since everything of mine's been red across the board till lunch time.

sd

markusantonius - 07 Mar 2006 14:48 - 2140 of 2787

I see it almost reached the penny milestone earlier! :o)

sidtrix - 07 Mar 2006 15:57 - 2141 of 2787

damn that was close, well hopefully by the end of play..... ;)

butane - 07 Mar 2006 16:28 - 2142 of 2787

C'mon deadfred, be a man, admit that the smell wasnt from DGT after all!

I see you sold out of SYM....if not for your pride/bad judgement you could have made some real cash here.

EWRobson - 07 Mar 2006 17:28 - 2143 of 2787

Heaviest day of trading that I can recall and certainly in last six months. Follow through tomorrow? Wasn't really trying to take credit from you; promise to promote your cause when I write to Shares: if I have to, because a good write-up should take us through 1p to stay there, i.e. where they should be.

stockdog - 07 Mar 2006 19:06 - 2144 of 2787

Only sparring, Eric! What was it that set them off today in particular do you think? Or was it just the time lag to get onto the MMs radar since the results?

sd

Global Nomad - 07 Mar 2006 20:27 - 2145 of 2787

lots of posting now on other boards, dragging in new entrants..glad we were in the loop to get in early.

EWRobson - 07 Mar 2006 20:34 - 2146 of 2787

sd: I earlier remarked that sp was down despite a lot of buying, presumably due to the fact that MMs had stocked up. Then, as I watched level2, buying continued but it seemed that one after the other the MMs were pout of stock and having to mark their prices up to attract buyers; also presumably, buying orders being fulfilled. The t1ps recommendation may have helped, primarily with smaller investors, though I suspect there are some sizeable palyers who use that service. Certainly, the indication is that DGT is now on more radar screens. 30m volume is easily the largest in last 6 months; at 250K not huge but 5% of the share capital. Interesting time if there is a carry through of buying tomorrow because MMs can't be holding stock and can only react by raising the price. Then, what if there is a strong statement in Shares or, less likely, Investors Chronicle? Still think both are unlikely. No resistance level to be broken until back to the flotation days. Looking back to the chart, the flotation price was 1.5p in 2001 and the price oscillated between 1p and 1.5p for some time. It briefly returned to 1.5p in early 2004 and I became interested later that year when down to about 0.8p. The achievement in these results must fulfil the hopes when launched and when breakthrough was perceived early 2004. That seems to suggest that a return to 1.5p is called for and that there could be resistance around that level. Interesting that that is the level called for by Daniel Stewart in a year's time. How do you interpret this picture?

Eric

EWRobson - 07 Mar 2006 20:40 - 2147 of 2787

GN: Thanks for that input. The implication is that DGT is moving into a 'hype phase'. The important thing for those of us who are long term holders to judge the time to take some profits. My view is that there is solid value up to 1.5p but after that sp could be getting ahead of itself. If this prognosis proves true then its not a bad thing to put this on record so that we don't caught up in the hype balloon.

stockdog - 07 Mar 2006 21:25 - 2148 of 2787

Eric: Look at the chart for the full nearly 5 years from launch at 1.20(?). Soon there was a strong support level at dead on 1p - this could still act as a strong resistance level to be overcome. There is also the mini Sep 2004 peak of .90p which we broke today and then fell back. I don't see this as strongly significant in the current mood. The final assault will be on the 1.5p level a strong resistance level in the first year and then again the famous widows' and orphans' peak of Spring 2004. This will take some beating, but I believe we will.

My own 1 year price target is 1.64p based on a forward PE of 12.5 on best estimated 2006 net profits. This ties in with tips predicted doubling of 0.80p. Also, it happens to be an all time peak beyond which there is not further resistance.

At 1p this share will represent 25% of my portfolio (having started as 15% of funds invested) which is pretty overweight in my book - so am tempted to be "adult" and take some profits at this level (thus reinforcing for others this historical resistance level by accident) to bring it down to nearer 12.5% and a free ride for the rest to 1.64. I'm also tempted to believe my own press and hold all for the full 1.64p, but I am having dinner with a friend on Saturday who put 100% of her savings in Polly Peck - they live very humbly now.

1p plus a free ride for the balance more than meets my target of 26% p.a. growth across the board. I think I shall probably have to be sensible, although I seriously doubt I will often come across such a performer again in my life time. 4-bagger in 2 years beats a 10-bagger over 5 which is my target for SEO and one or two others I hold patiently.

Also being an employed person (some of us have to make up the GDP you know) I look forward to April 1 when I believe I shall be able to inject some of my portfolio into a SIPP as well as keeping my exec pension from my company. Can't put AIM stocks in there can you, anyone know?? So I'll need to convert to cash to buy more SEO and KMR which you can.

Luckily I am nowhere near the 1.5m life time limit (yet, lol!) so plenty of more effort required to live an old age of comfortable sloth.

sd

canary9 - 07 Mar 2006 21:43 - 2149 of 2787

Stockdog, no problem with putting AIM stocks in a SIPP. I opened one for the missus some years ago and I have mainly AIM stocks in it.

stockdog - 07 Mar 2006 22:01 - 2150 of 2787

Canary - thanks. I just returned to say I'de read on line that you could - perfect for my investment aim which is to turn a small pot of scraped together cash into a retirement fund over a decade or so.

I's already come to the conclusion that 7% return on tax free money is only equivalent to 11% on money taxed at 40% and I reckon I can do at least 20% myself. Now to think I can turn some that 40% taxed fund into 100% via a SIPP is great news come April. Still want to keep a fund of money outside the pension system for emergencies and change of life plan moments - ISA's will do it and ordinary investment a/c's where one can manage CGT within the allowable limits of a joint fund.

Life in prospect is suddenly becomeing rapidly more plausible!

sd

canary9 - 07 Mar 2006 22:25 - 2151 of 2787

20% is a good aim, but remember there are years when the stockmarket falls. My return is close to 40%p.a. net of any new investment over the last 3 years, but over 10years it is nearer to 10% due to some large losses over the period 2000-2002, when the index halved in value. The 40% tax break will help returns further and it certainly feels good knowing the taxman is helping to make these returns. So far with a mixture of PEPs, ISAs, SIPPs and CGT allowances , I've managed to avoid him claiming any back, but it's a challenge.......Canary

markusantonius - 07 Mar 2006 22:46 - 2152 of 2787

Good posts from Rod, SD and Eric, as usual. Just in case anyone is unaware of this - you can offset capital losses going back as far as 5 years & 10 months providing that they have not already been used, i.e. in Layman's Terms: they must be used chronoligically as & when the 8,200 CGT allowance has been exceeded (nett, that is). It is well worth contacting the Rev. as even yours truly wasn't aware about the 10% cap on taxable AIM stocks held > 2 years - the same goes for "business assets", as well.
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