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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

EWRobson - 28 Nov 2006 21:46 - 2556 of 2787

The takeover taking too much of TR time? Possibly, though it is a going concern and clearly a separate profit centre. Its actually fallen into DGT hands because of the market prospects I reckon. The indication is that they may be on the acquisition trail again. Broadening the base at little cost, improving the offering to clients and the prospective average return per client. But you have got to win them and keep them. However it seems to me that the present price isn't expecting anything much from the results. The cap. seems far too low given their ability to generate cash. Needing some 'dog'put' sd!

Eric

stockdog - 28 Nov 2006 21:59 - 2557 of 2787

I can't remember if I've posted here or elsewhere, I am looking for pro forma 1,250,000 net profits after tax from the combined duo - a PE of 5.4. Even if as low as another poster suggests 1m, this is a PE of 6.8. Neither of them reflect the current or future prospects. Reduce either of these by 25% for the enterprise PE if you subtract the EOY cash from the BS.

What a sub-penny share being used as a private bonus bank by a single, albeit talented, director and no dividend lacks is any perceivable means of achieving a re-rating. That is what the long-term means here - waiting for the tide in a currently land-locked sea. We need that key event that opens us up to the wider ocean, to allow the SP to find a newer level. Meanwhile, be happy we're growingly profitable.

PS. Still can't explain or feel comfortable with the last few days' drop in SP. MM manipulation, or what. The apparent volume hardly justifies the move down. Must be a seller of volume off-loading. There are consistently more on offer than bid on Level 2. So MMs trying to sell, not buy, any stock. Are we waiting for an overhang to work through - whose? - the new holders on the takeover of SPE - surely locked in for at least 12 months? What about the placees? could they be selling off at any price above 0.65p placing price? But today we're below that.

Hang out the banners on the outward walls. The cry is still they come!

PPS. Nev, please use your muscle to find out wtf's happening and put me out of my misery. TIA.

stockdog - 28 Nov 2006 22:38 - 2558 of 2787

Looking at today's trades is pitiful - 2 X 2m sold respectively at .55p this morning and 0.45p at luch time. NMS is sooo small. I did ast TR about this 2 AGMs ago, but he said it was nothing to do with the company.

So 10k's worth is almost impossible to shift at a reasonable price relative to quoted spread.

Real problem is we are devoid of meaningful buyers. Anyone got the latest on the free float of shares out there? The institutions have not come anywhere near this one yet - I believe bulk of recent placees could have been CFA and SPE private clients.

Nothing to do but wait - don't look at the SP, only read the RNS and news about the company operation for 6 months. The SP is irrellevant until the wider market picks up on this. Come to think of it, the most likely "wider market" is a bid approach. As we move further into the end of cycle ability of larger operators' ability to grow organically, they will turn cannibal in a last attempt to demonstrate value to their shareholders (or more commonly their remuneration committee!). Could be worse. Take out PE must be minimum 10 which gives an exit price of 10-12.5m = .90-1.125p per share. That's about double my 0.577 average purchase price and no broker's commission or MM's niggardly sub-bid discount.

Someone tell me I'm preaching to the converted of a flawed religion.

markusantonius - 28 Nov 2006 22:53 - 2559 of 2787

Stockdog, If I may..... IMHO: Unless TR and co. are planning some major diversification then I think Dowgate will struggle such is the sign of the times they are in ATM. AIM is not the flavour these days, is it? Continue to monitor anyway and wish you all well!

nevgroom - 29 Nov 2006 10:10 - 2560 of 2787

SD - I will try to articulate a note to TR over the weekend (my time is a little short at the moment) on behalf of the concerned.

Personally, I feel no discomfort at the moment - You hit the nail on the head - "we are devoid of meaningful buyers". No buyers means MMs have little motivation (they do after all work with dozens of other shares which make them plenty of cash for little graft!). As has been said on numerous occasion, 2 things will move this up significantly - Positive news (regularly to sustain the move up) or institutional interest (after consolidation when the number of holders is more manageable). If TR wants investors he can get them (he raised the takeover capital without breaking sweat). I really don't believe he has any qualms about seeing the short-term price dip - In fact, I think it is serving another aim in so far as they will be consolidating the number of holders.

Apologies for the disjointed post - Just a quick thought dump

Nev

markusantonius - 29 Nov 2006 15:20 - 2561 of 2787

Not being a TA expert, what do you think the support level is looking like ATM, anybody.....?

EWRobson - 29 Nov 2006 20:15 - 2562 of 2787

Helpful comments. Re point of Markus, TR's strategy is clear if you read the reports: expansion via acquisition. Seymour Pearce was a reverse takeover so they are quite happy to consume larger somnulant animals. It seems to me that a scrip issue would help considerably. It seems that institutions do not like penny shares. 50 or 100 for 1 could make a world of difference. I suspect though that the sp will meander on until the new year when some speculation will start on annual results - its happened before.

Eric

Paulo2 - 04 Dec 2006 19:35 - 2563 of 2787

RNS Number:2020N Dowgate Capital PLC 04 December 2006


Dowgate Capital Plc / Ticker: DGT / Index: AIM / Sector: Finance
Dowgate Capital plc (the "Company" or "Dowgate")
Grant of options


The Board of Dowgate announces that, for unforeseen technical reasons and with the exception of options granted to Anthony Rawlinson and Ian Buckley, being Directors of Dowgate, and options granted to associates of Seymour Pierce Ellis Limited ("SPE"), it has decided to cancel a total of 133,475,008 share options (representing approximately 11.98% of the issued share capital of the Company) granted by the Company to directors and staff of City Financial Associates Limited and SPE following the announcement of the acquisition of SPE on 28 September 2006, and, with effect on 1 December 2006, the Board has resolved to grant new options on identical terms to the original grants, except that the date of new grants will be Friday 1 December 2006 and the period during which the options will be exercisable will be 30 November 2009 to 30 November 2016. For the avoidance of doubt, and as previously disclosed, all of the new options have an exercise price of 0.65p per Dowgate ordinary share and all performance conditions attaching to the earlier grants will attach to the new option grants.

Included in the new grants are 22,286,154 options granted to Neil Badger, a Director of the Company, and 55,715,385 options granted to Clive Mattock, a director of SPE. Clive Mattock is a related party for the purposes of AIM Rule 13.

The Directors, who have consulted with Grant Thornton Corporate Finance, consider that the terms of the options granted to Mr Mattock to be fair and reasonable insofar as Dowgate shareholders are concerned.

Enquiries:

Dowgate Capital plc
Tony Rawlinson 0207 090 7801


Grant Thornton Corporate Finance
Graeme Thom 0870 9912790
This information is provided by RNS
The company news service from the London Stock Exchange


markusantonius - 07 Dec 2006 19:48 - 2564 of 2787

0.60p in Dec. 2006 was not quite The Spring forecast, was it, Eric? :o(

Has SD, yourself or anyone else done a recalc. of the figures lately - just wondering how they stack up as we approach 2007?

EWRobson - 07 Dec 2006 20:08 - 2565 of 2787

Hi Markus. sd gave his forcast a few days ago of 1.25 pbt and a pe of 5.4. Low estimate could be 1m and a pe of 6.8. He also commented that an exit pe on takeover would be not less than 10. Indeed you could argue that the pe should be not less than 10 implying an sp of around 1.1p.

Despite the takeover of Seymour Pearce, the share is still under the radar of the institutions. The interest generated by the takeover has long since expired. So unlikely to move significantly ahead until we approach the finals; possibly starting to move January for March results. This is the pattern of the last couple of years. There is also some concern about the AIM market. However the interim pbt was 485K and that was without an SP contribution. The current price is below the acquisition price. This suggests that the price is unlikely to fall further, or, if it does, it will attract buying. Looking to go back in myself on the arrival of funds.

Eric

markusantonius - 07 Dec 2006 20:22 - 2566 of 2787

Thanks, ERW. Will continue to monitor.....

stockdog - 07 Dec 2006 22:46 - 2567 of 2787

Remember my forecast of 1.25m profit was pro forma, as if DGT had owned SPE for the whole year, not just from October. So actual profit will be made up of 12 months of DGT and 3 months of SPE - approx 770,000 after tax.

EWRobson - 07 Dec 2006 22:57 - 2568 of 2787

Last year SPE had pbt of 617K; sounds as if figures are down this year but still positive. Lets work on your combined 1m fugure which may now be a bit optimistic for CFA alone but reasonable with SPE. Suggests that a price of 1p is attainable with possibility of breakthrough that psychological barrier; presumably a resistance level because launched at that price (I believe).

markusantonius - 07 Dec 2006 23:27 - 2569 of 2787

OK, very informative posts, guys, thanks. So guess I should check back here in mid January to see where things are heading...?

EWRobson - 08 Dec 2006 13:23 - 2570 of 2787

Dangerous to take your eye off the ball, as you know from golf! MACD turning up. If volume increases I suspect the share will start moving; unlikely to be selling on any scale so that would probably imply buying pushing the sp up to get holders to relinquish.

markusantonius - 08 Dec 2006 16:48 - 2571 of 2787

Of course!

stockdog - 08 Dec 2006 23:33 - 2572 of 2787

Eric - think SPE had PBT of 617k for H1 2006, but seemed to have a 50% tax charge, don't know why. So I've taken 300k X 50% PAT for Q4 2006. Plus (485k H1 + 400k H2) less 30% tax for CFA = 620k. So total of 770k PAT for combo. This is a pro forma (full 12 months combo) of 1,228k.

With 1.114bn shares in issue the pro forma EPS is 0.11p for a PE of 5.45. Net of the cash on the BS this is ann enterprise PE of about 4.5. Fair value at PE of 10 in an uncertain AIM market still producing cash profits suggests an SP of 1.1p. This is consistent with all that's been written by those who've done the analysis to date.

Only problem is - what will be the mechanism by which the re-rating is recognised? It's such a tiny stock the instis won't even see it let alone look at it. Perhaps a dividend could help change this - but still so tiny - if AR could be persuaded to leave a few crumbs after his bonus!

My own belief currently is - as organic profit growth dwindles as the cycle turns down, a predator will be pursuaded that acquisition will achieve acquired growth, especially with a couple of million sitting unused on the BS.

EWRobson - 09 Dec 2006 12:48 - 2573 of 2787

Thanks sd. Figures look realistic: perhaps conservative but there could have been a fourth quarter downturn (optimistic comments from TR re trading at takeover). Re the institutions, presumably TR, and perhaps particularly, those from Seymour Pierce must meet with city acquaintances responsible for funds management. There can't be many stocks which are both profitable and generating significant dollops of cash. I note you refer to 'organic growth dwindling' - the current sp doesn't even respect a level trading forecast.

Eric

white westie - 12 Dec 2006 08:35 - 2574 of 2787

5 Million sold late last night and another 4M just gone through now sold before opening and no drop in the SP what the hell is going on?

someone must be mopping all these sells up maybe a big buyer in the background but if so why are you still being able to buy 2.5M on-line this morning?

something strange going on here i think its all very odd, anyone got any ideas?

ww

EWRobson - 12 Dec 2006 13:23 - 2575 of 2787

See the sp has eased now so MMs presumably trying to off-load the stock they have acquired. Surprising to see 8 million sold at 0.4p half after hours and half before opening. Left at least 10K on the table. Likely to be a forced sale and poor chap taken to the cleaners. Could well be a good time to pick up the odd million!

Eric
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