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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

stockdog - 03 Apr 2007 01:02 - 2646 of 2787

Eric, not trying to predict the most likely outcome, just looking at very modest growth to see where it gets us, and it seems to get us far enough. If the true synergy values are realised we could do even better.

Quite a few PI's selling out today ~4.5m, not enough to be worried by. Someone took the op. to buy in 500k at 0.64p.

Patience wearing thin, but what can yo do. Come on TR put yourself in the PI without a bonus's position.

corehard - 03 Apr 2007 13:39 - 2647 of 2787

Still going to stick with these !

ptholden - 03 Apr 2007 13:53 - 2648 of 2787

Guys, you have huge patience!! I am sure that the SP will eventually reflect the prospects of the company, assuming that TR et al stop stripping the profits in bonuses. I can only think that it is the bonus / trust element that is now holding the SP back, because the turnover / profitability is quite impressive for a small company. Personally, I am quite happy to have eventually closed out at a reasonable profit. I stuck the proceeds into LNG for a week and realised a 35% return on my investment, reflecting roughly 50% increase on my capital had I stuck with DGT.

EWRobson - 03 Apr 2007 14:16 - 2649 of 2787

HI, Peter. How's the golf? I suspect you are like me in that you stock with some, lose patience with others - either taking profits or cutting losses. But my general experience is that you tend to do better sticking with those that you have got to know really well. With DGT, you can certainly argue that bonuses are very high in relation to earnings but a counter-argument is that they are retaining the excellent team that they have because of the bonuses. There will gradually be increased margins as they add in the fundraising aspect. They are not completely disregarding their investers with their plans for consolidation and dividends. Short-term weakness quite likely to continue as existing holders lose patience, to be replaced, quite likely, by longer term funds. TBIYTC, in my view!

Eric

EWRobson - 04 Apr 2007 12:56 - 2650 of 2787

3 Trades of 2,275,000 at 0.62p, 0.58p and 0.67p each categorise as X - 'cross at same price'. Perhaps someone can enlighten me; if they are matching trades then the prices are every different.

stockdog - 04 Apr 2007 14:43 - 2651 of 2787

Not matching - by the way there are now 4 of them - since they are each a buy and a sell between two parties who've agreed to trade at one price without an intervening MM taking any risk. Are they all coming from the same source or all going to the same destination?

It is a riddle, wrapped in a mystery, inside an enigma. WSC

kimoldfield - 04 Apr 2007 16:34 - 2652 of 2787

Are we allowed to breath a sigh of relief now?:-

The Board of Dowgate Capital plc ("Dowgate" or the "Company") is pleased to
announce that it is today posting a circular to Dowgate shareholders convening
an Extraordinary General Meeting of shareholders ("EGM") at which it will be
proposed that the Company's share premium account be reduced to eliminate
accumulated losses on the Company's reserves which existed at the end of 2006
so that the Directors will be in a position to consider the payment of
dividends out of future distributable profits generated after the effective
date of the reduction.

In addition, the Board is proposing a consolidation of the Company's existing
ordinary shares on the basis of 1 new ordinary share of 7.5 pence each for
every 30 existing ordinary shares of 0.25 pence each. This share capital
reorganisation requires a very slight increase in the authorised share capital
of the Company to arrive at a figure that is exactly divisible by 30.

The Board is also proposing that the Company be authorised to purchase in the
market up to 10 per cent of the Company's issued share capital.

stockdog - 04 Apr 2007 17:44 - 2653 of 2787

Damn - I lose half a new share on consolidation!

This is great news, imho, still can't find an RNS but I've seen the AFX report.

Anyone know a quick way to value the dilution or concentration in terms of SP re the buy back - once we know the price being offered? At least it will reduce the capital base in terms of PE and PEG, but also removes cash from the BS. Does this mean another acquisition is not in the immediate offing?

The elimination of accumulated losses paves the way for a dividend which must put us on the radar of serious investors who've so far spurned DGT. Since it has virtually zero capital requirements outside acquisitions, its net profits are almost entirely available to pay dividends. With cover of say 3 X, and a PE of 7.5, we could have a dividend of 4.4% quite easily, falling to 2.7% as the SP rises to a more realistic PE of about 12.

Keep the faith. DGT is just about to turn from ugly caterpillar to beautiful butterfly (ephemeral as that image may be!)

kimoldfield - 04 Apr 2007 19:38 - 2654 of 2787

Maybe there is a chance that the butterfly will be eaten by a predator SD!
Although it seems a little complicated I like DGT's proposals and unless I am not understanding the proposals, small shareholders are not going to be shafted, a promise that TR seems keen to keep.

EWRobson - 04 Apr 2007 23:20 - 2655 of 2787

Pleased to see the share consolidation so soon after the results - which were met with profit-taking and a danger of buyers losing interest for six months. So we are immediately talking about an sp of 19p which LOOKS more attractive and loses the stigma of being a penny share. The buy back would seem to make that 21p - I assume that buying in the market is just the same as any other buyer and investors may hold on to get a higher price. Add the attraction of a dividend to many fund managers and we appear to have a much more attractive scenario. I suspect we may have a positive response in the market and for the next week or so. May even get a mention in Shares - chance would be a fine thing!

Eric

corehard - 05 Apr 2007 12:36 - 2656 of 2787

Onward and upwards !!!

capper - 06 Apr 2007 09:19 - 2657 of 2787

Reading the EGM document it seems that the company are ready to take this to the next level. Making the shares more noticeable for institutions, removing all trace of the old regime and looking after sp value buy using some of the profit to reduce the shares in circulation. 2nd of May will see a new beginning and reward for all the patient ones amongst us.

capper - 27 Apr 2007 16:57 - 2658 of 2787

450K in fees and no comment.

EWRobson - 28 Apr 2007 21:03 - 2659 of 2787

Not a problem, capper, as I see it. Yes, they have an attractive incentive scheme but if that keeps the guys and brings in the business I would accept it. Low compared to much in the city.

Consolidation on Tuesday. Monday could be a good time to pickup a few shares as there could be some institutional buying on the consolidation (no longer a 'penny share'!)

Eric

ptholden - 28 Apr 2007 21:46 - 2660 of 2787

Eric

Not wanting to dampen your spirits, but why would DGT attract institutional buying? This is a comment often trotted out on consolidation and is rarely the case for such a small cap company. Unfortunately for holders I think the other adage may be true, that of SPs slipping on consolidation rather than rising. I also think that the size of bonuses TR and his team are awarding themselves are disproportional to the profits generated.

Personally I was very happy to sell prior to the Results and invest the proceeds in LNG for a further profit and then move the funds onwards again. Much better use of my money than playing the forever waiting game with DGT.

pth

capper - 29 Apr 2007 21:44 - 2661 of 2787

But you are still looking. I think you will soon be longing to be back in. Maybe it will be too late.

ptholden - 29 Apr 2007 21:59 - 2662 of 2787

I look, becuase I held this share for nearly three years and retain an interest. If it goes up, great for all long term and any new holders. It won't bother me a jot. I have bought and sold along the way and have made a reasonable profit, so no regrets as far as I am concerned.

EWRobson - 30 Apr 2007 21:05 - 2663 of 2787

Agree your comments, Peter. My holding is also significantly down on earlier levels: partly becuase I have used up much of my investment funds! We will know tomorrow who is right about the effect of consolidation. My argument is that: (a) DGT must be visible in the City; (b) AIM market is itself a growth area; (c) the penny share syndrome certainly puts many off. Re bonuses, I would like to see options paly a greater part - dilutes holdings but leaves a better bottom line and therefore better pe.

Eric

ptholden - 30 Apr 2007 21:24 - 2664 of 2787

Eric, I don't think you will have a resolution to whether the SP will be better supported as 'consolidated' tomorrow. In the short term it may well dip further, although I don't hold with the statement that ALL consolidated stocks fall. I really do think the issue with DGT is the subject of bonuses and that more than anything else is perhaps putting off PIs. There is no doubt that the company is doing extraordinarily well when compared to three years ago, yet the SP has hardly moved. I only made a decent profit because I nipped in and out, plus the benefit of buying a large chunk at 0.45p. The investors who have sat on their holding have nothing to show for their patience (yet), money that could undoubtably have shown better returns invested elsewhere.

EWRobson - 02 May 2007 18:47 - 2665 of 2787

Peter The price has effectively just stayed steady - half way between are respective views. On the whole, the comment was positive but will need time to be reflected in figures. Indication is that the first half may not be anything special. Particularly significant is the emphasis on recruitment - record to date is excellent. Bonus levels will attract good people. Overheads will be spread better so that proportionally there will eb more for the investor. But, of course, that is almost another year to wait. One couldn't argue against using funds elsewhere, your point, and coming back at the turn of the year.

Eric
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