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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 - 12 Feb 2008 12:49 - 2705 of 2787

Should be a good move, Canary. I am hoping that our good doggy friend, sd, will do some research on business won before strengthening my stake. by the way, how's the golf - sunny outside if not in the City!

Eric

canary9 - 12 Feb 2008 13:18 - 2706 of 2787

Had a good summer and got the handicap down to 18, but then drifted back up to 19. Hoping that the weather will last the week, as I am playing Pinner Hill tomorrow and Brocket Hall on Friday.
Rod

EWRobson - 12 Feb 2008 15:47 - 2707 of 2787

Hi Rod. Thoought Brocket Hall was great - played there with Hoodless Brennan. Lucky boy! Still at 20. Moving down to Dorset and joining Sherborne when house is sold; real retirement at last!

Checked up on CFA website. Clients last year were 11 in first half and 10 in second. That is against 16/11 in 2006 and 15/13 in 2005. So down somewhat but not drastically so. There is also Ellis to add to the mix which I would have thought was a bit of a cash cow. Cap. at takover was 7.24m with the cost 44% of the equity or about 3.2m. Cap now is 4.5m. That looks low even in today's harder times. If each were worth 3m then that would be 6m total. So it looks reasonable to expect a rise for the finals.

Eric

stockdog - 13 Feb 2008 02:30 - 2708 of 2787

Eric
I was born in Sherborne - whereabouts are you moving to?
Regret no analysis for DGT - full reporting of all transactions a little obscure these days, especially for SP side of business.
Forgive brief note - very late here in Berlin, after festival partying.
sd

EWRobson - 13 Feb 2008 18:08 - 2709 of 2787

Thanks, stockdog. Enjoying the german bones then - probably go down well with the Bier! Yes, it seems that they are wary about postuing the value of transactions. Can you read anything into the mix of business. Given that Ellis is fairly stable as its clients will go on needing investment advice, how would the outcome look if trading is, say, 25% down with CFA? I still believ e the cap. is far too low and should be more like 6.5M or up 50%.

Eric

EWRobson - 05 Mar 2008 16:39 - 2710 of 2787

Good to see some business development activity going on with a new Ellis corporate broking group based in the City; should think they will take on fundraising for CGT clients as well. Should be start of a run up through to the results.

Eric

stockdog - 05 Mar 2008 20:17 - 2711 of 2787

Nice 12% rise today (mind you cast into deep shadow by old favourite SEO''s 36% rise!) - within a whisker of my average buying price whilst I enjoy the 7.2% net of basic tax yield (assuming they pay out the balance up to 1p on the final - can't see why they wouldn't).

Intrigued as ever tio see the finals - last year they were published 30th March, my guess is earlier this year, but no sign yet. If we repeat the EPS of H1 of 1.12p to make 2.24p for the full year - a modest enough ambition - that gives an historic PE of 5.90 (even less enterprise PE, expecting net cash on the BS at 31 Dec) and a Price to Book ratio of 1 - i.e. nothing in for the business. I really have no idea what to expect for H2, except not less than H1. Could be a nice 20% increase, or more? We'll see.

Mind you, we still have not broken up throught he inexorable down trend since consolidation to 30p. I seem to have ever more perfect hindsight these days!

How's Sherborne?

EWRobson - 07 Mar 2008 22:27 - 2712 of 2787

Hi,stockdog Still not moved. The sale fell through but the decision is effectively taken to move to Sherborne or, perhaps more likely, Sturminster Newton.

My reading of the website is that H2 will do well to match H1 but it would be unusual if the dividend didn't match. The expansion of Ellis services is good; presumably it will add a fund-raising service to CFA clients. My holding is pretty small compared with earlier, exciting times; become a pretty drab share. But if it makes money and dividends that can't be bad. I still believe it will take off some time but we may have to wait for a healthier financial climate.

Marvellous meal tonight - just about the best Rib Eye Steak I can remember and the Rioja was superb. Sweet dreams!

Eric

Global Nomad - 11 Mar 2008 08:22 - 2713 of 2787

results out,
final dividend of .6p
good results I guess given the market conditions....
change of name

what chance of changing the down trend ...

Global Nomad - 11 Mar 2008 09:24 - 2714 of 2787

does anyone get the feeling that this share is now so far off investor's radar that with relatively good results there is absolutely no activity, either trading or posting, bar a single sell trade

how will this share recover any further ground if the results cannot lift it.

don't mean to be pessimistic and like them I do feel optimistic for the company, I would just like to see that reflected in the sp.

white westie - 11 Mar 2008 09:52 - 2715 of 2787

7 trades on both markets so far i make it,

buys 16,898
sells 146,232

I also cannot see how this share will recover lost ground as results only lifted it 0.5p bloody rubbish.
plus while they are paying these new bods with such a massive share option when they have yet to do anything.

ww

stockdog - 11 Mar 2008 12:33 - 2716 of 2787

The chasm between excellent revenues and the division of net spoils between shareholders and management is now beyond a joke. And now we learn we have given away 22% of our company to attract the 2 new Ellis directors! They'd better start earning their keep, and fast!

With a joke of a non-exec in the person of good ol' boy Ian Buckley, TR and friends are no longer making any pretence at fair play.

The dividend of 7.4% alone makes this worth holding, but I utterly despair of any prospect of a re-rating of the SP whilst the company is cynically bled dry of any potential accumulating value..

We need a remuneration committee which excludes TR and to split Chairman from CEO function. It's up to all of you to be heard at the AGM. Anyone know if there is a rule allowing PI's to enforce an agenda item for discussion?

white westie - 13 Mar 2008 13:55 - 2717 of 2787

not much comment about the results and the large payments to the new bods on this board, have most of the people who used to post on here given up in disgust and sold out?
only stockdog has offered his opinion so far and his first couple of lines just about sums up my feelings on the matter and the majority of feelings of other people on the other board as well i think.

The SP has already fallen 2p from when the results came out, (only 2 days) how much further is it going to fall? as i dont expect to hear anything of any interest from the company for another 6 months now until interims going on past experiences.

ww

kimoldfield - 13 Mar 2008 14:24 - 2718 of 2787

Holding a small residual number of shares in the hope that some day the directors will be kicked out and replaced by a Board that has at least a small amount of regard for PIs, but yes, pretty disgusted with DGT to be truthful.

EWRobson - 01 Apr 2008 21:31 - 2719 of 2787

What do you know? Results came out in a week when I was incommunicado and just visited the site as I thought they would be about now. I understand the disappointment, particularly the lack of movement in the sp. There are plus points though: (a) earning potentially significantly increased in both parts of the company; (b) appear to be weathering the financial storm; (c) a decent yield.

We probably have to accept that DGT is no longer a high short-term growth potential situation but one to tuck away. Once they establish a pattern of increasing the yied (not difficut because earnings cut by one-time charges) then their rating should be upgraded. Small finance companies are right out of fashion at the moment. But staff are becoming significant shareholders themselves and will wnt to see the sp progress.

EWRobson - 02 Apr 2008 21:26 - 2720 of 2787

I expect every one has lost interest! I have come to the conclusion that this is a good time to go into DGT and not just for the short-term although perhaps being patient for up to a year. Its very significant, I blieve, that earning capacity has increased by a third, based on recruitment. Why? Because, whilst the market is meandering along, competitors have dropped away giving DGT a significant opportuntiy. Current year has started well. Even if there is not a rise in profits this year, or a relatively small one, we know that some costs will not recur. So a dividend increase, say to 1.5p per share, should be on. Yet yield is 9% now. Has to be a buy with a one year price target of 25p.

Eric

EWRobson - 03 Apr 2008 20:24 - 2721 of 2787

I seem to be left here on my own. I need my doggy friend for company even if he just want to growl at the company.

maggiebt4 - 03 Apr 2008 20:32 - 2722 of 2787

Hi EW not alone but afraid not as good as the doggy. Have not posted before as I probably broadly agree with your sentiments. What I bought into as a company about to go places has sadly disappointed but I still think, given time and a few less bonuses, this could still come good. Have very small holding now so will tuck away and wait and see. Enjoy reading your thoughts and comments so keep writing.

kimoldfield - 03 Apr 2008 21:51 - 2723 of 2787

Also here, but fairly speechless about DGT at the moment! Agree that there may be something to come out of it ultimately. I'm being too impatient maybe?

stockdog - 04 Apr 2008 10:35 - 2724 of 2787

hi Eric and other faithful. still fully in, in a somewhat dogged way. I think there is a real problem of imbalance in the share of spoils between management and shareholders of a basically nice little earner doing very much everything right at the operational level. On another thread I raised issues I hope someone will ask at today's AGM I can't get to, like:-

is TR as chair and CEO with only one weak non-exec best practice?

who runs the remuneration committee?

how many 500k's p.a. has TR and others earned plus share options galore whilst shareholder value has failed to reflect equivalent results?

still, 9.75% net of basic tax div. yield is better than a deposit account even if over time (2-3 years) we only get back to 14p (my break even). I do believe that 1p div can be at least maintained if not increased very much this year. one cannot ignore the basic market ambience and not only flight from small caps to big/cash, but no doubt large margin calls from some bigger players to cover losses on sub-prime and other erstwhile over-promoted hedge funds. a la W. Buffet, would I like to own the whole of DGT whilst it continues to generate profit/cash? - you bet, so I am happy to own a small share of it.

would like to see SP turn a corner though
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