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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

butane - 19 Apr 2005 17:02 - 391 of 2787

I make it 2.1 mill buys and 3 mill sells

overgrowth - 19 Apr 2005 17:12 - 392 of 2787

Adacol - I agree.

I think that the first sale went through at 0.35p and the rest went through at 0.33p apart from those above NMS which were penalised 3 ticks and had to sell at 0.30p.

All the rest were buys. The last trade at 300,000 looks like a limit order buy.

Just out of interest, to see how skewed the trades screen can make things look, I bunged the figures into a spreadsheet and came up with:

Buys: 2,425,537
Sells: 2,987,026

Which is pretty good for a day when there was an outside chance that the results could have been taken badly by the markets.

Volume overall was very low for a results day, which suggests that those who are in already are happy to hold on for the big gains to come during 2005, and that there was no nasty "surprise" element in the results.

Intandem are due to float on Friday which may well attract more investors to the potential of CFP.

I suspect that long term holders will also be topping up in the next few days (like yourself) though are either waiting for funds like SD or are waiting for evidence that the price has bottomed out (I think it has and will go up from here).

After the last sell of the day I noticed that the MMs put the offer back to 0.43p - with a bit of sustained buying pressure they're going to mark the price up very quickly.

EWRobson - 19 Apr 2005 21:32 - 393 of 2787

moneyplus: the problem is that, in common with Yul Brunner, I don't have much hair left. Have you an alternative to propose?

stockdog: where does the 'quite clear 414K' come from? Can't see it myself: do you have to lie on the ground with your paws in the air? By the way, I thought the Lindemans Shiraz good this evening.

So, given that there was a small profit before exceptionals last year, and trading is good this year with obvious provisos re future deals, why the reticence in declaring it and why is break-even described as somthing in the future? The answer may lie in the fact that one quarter doesn't make a year as the company found out last year.

May not be much move until the AGM on 25th May which might tease out more projections. However, there is a very positive concealed scenario that could lead to positive professional comment and a run on the share. I think I ought to raise the ante to 1.5m shares to prove your manhood and/or womanhood!

Eric

overgrowth - 19 Apr 2005 22:37 - 394 of 2787

Eric - there's chatter on the advfn board which could explain why the results are "low key".

Remember that GHW Group (an unlisted PLC) bought up 6.6% of the company in January.

Well, it just so happens that GHW are in exactly the same line of business as CFP - lots of scope for synergy there...

stockdog - 19 Apr 2005 22:48 - 395 of 2787

eric, quite clear comes from the actual reported operating costs of 1.714m less Tony R's statemetn that without the settlement costs the op. costs would have been about 1.3m in the CEO's statement.

Talking of Lindemanns Shiraz, I've just discovered a matching pair (you know how I like to invest in pairs) of Chilean origin Cono Sur a pinot noir and a viognier varietal - one of my favourite slightly perfumed grape - best example being the famous Condrieu (although some non-Condrieu can be a lo tmore reliable) - and he best thing about these two are they are at the bottom of the market - 3.49 a bottle - drink your heart out Robert Parker.

BTW, looking at what my small office costs to run in the W. End, adjusting it for 4 principles and 2 support staff and adding 50% for City location and style and higher basic earnings - I get to about ~800k op. costs - add non-exec directors and AIM listing requirements and you get nearer 1m, less than the 1.2m I did the numbers on. SO maybe the profit for 2005 could rise to as high as 650k or so, if they manage to perform on revenues as I suggest. Even if they don't earn so much, this lower overhead leaves a profit of 500k. With a market cap of 2.3m at today's prices, that's a paltry PE of 4.6 - double, treble or even quadruple it as you will, the only way is up.

SD

DFGO - 20 Apr 2005 00:52 - 396 of 2787

hi stockdog

when the begin

stockdog - 20 Apr 2005 01:08 - 397 of 2787

?? :)

arawli - 20 Apr 2005 07:41 - 398 of 2787

Morning All

Missed all the fun yesterday and will be at work all day today as well.

Results as expected really. I just hope that we have seen the last of the payouts to JS/SB. If it is right that we made a small profit before these costs then this year must already be close to profit as we have had the same number of floats already.

It will be interesting to see where the SP goes today as I think they were probably trying to get cheap stock for a Director buy and it didn't happen!

I am now more confident that this is a good company but hope that we don't have another company sniffing around us at present. I may well buy some more early next week if they stay at this level.

All the best

Andy

taylormade - 20 Apr 2005 08:42 - 399 of 2787

How do the mms get away with putting buys into the sells can anyone explain please.

ptholden - 20 Apr 2005 08:48 - 400 of 2787

taylormade

See the explanation on the MOI thread. Nothing to do with the MMs

overgrowth - 20 Apr 2005 08:59 - 401 of 2787

taylormade - moneyam's explanation of how they derive buys and sells on the trades screen is:

"It should be noted that all trade declarations made by the market do not include a buy or sell indicator and therefore we have to derive this information ourselves.

The policy we have adopted is based on the mid price of the stock at the time of the declaration.

For Example a trade declared at a price that is higher than the mid price at the time of declaration would be put in the buy column, a trade lower than the mid price would be put in the sell column.

A trade which matches the mid price would be considered unknown. Please also note that the market can delay declaration of the trades for up to an hour in which case we will not make any assumptions and place that trade in Unknown column."

If you follow the actual buy/sell limits through level 2, you can see that the published limits on the trades screen do not always acurately reflect the actual price at which people are buying and selling.

taylormade - 20 Apr 2005 09:12 - 402 of 2787

Thanks for that OG.

overgrowth - 20 Apr 2005 09:30 - 403 of 2787

No probs.

As an example - the on-line limits right now are:

buy 1.5M @ 0.35p
sell 150k @ 0.33p

However the published spread is still showing as a hefy 0.33 - 0.40p (which could well be discouraging buyers).

This means that the first two trades for 100,000 and 50,000 were true sells, however the 208,038 reported as a sell was actually a buy.

stockdog - 20 Apr 2005 11:29 - 404 of 2787

Also the 43,000 (I assume) and the 280,739 (yours truly) trades at 0.35p were buys. Still not quite sure why so far inside the spread, but I'm not complaining at the price I just got!

SD

DFGO - 20 Apr 2005 13:11 - 405 of 2787

stockdog

Can you through some light on this please I can not remember correcting any of
your posts, and the post seems to have disappeared now

Growth Dabbler - 19 Apr'05 - 15:39 - 7197 of 7245


Have just noticed this comment from stockdog on the other board. It looks as though my previous calculations on the pay off costs could have been a bit out (I never said I was an accountant - where was DFGO to correct me...?)

"The increase from 607k to 914k net assets/shareholders funds is due to the 439k fundraising less 132k deficits from P&L net of amortisation, depreciation and something else I can't quite lay my hands on. This has NOTHING to do with the adjusted operating result per se.

The costs of clearing out the old wood are quite clearly noted as approx 414k. So the overall outturn of 366k loss represents a profit of 48k on continuing activity."

So, without additional expenses incurred in 2004 rather than making a small loss of 68K, CFP would have actually made a small profit of 48K!!! despite all the deals which never came to light at the end of the year.

So, if they could make 48K trading profit in a "bad year" with expensive overheads like SB and JS, what are they going to make in what is looking like a very good year without the extra overhead burden of those two ?


stockdog - 20 Apr 2005 13:16 - 406 of 2787

DFGO - just read the words and the understanding will come.

SD

EWRobson - 20 Apr 2005 13:36 - 407 of 2787

sd is building up his stake again. He could well be sniffing this out as a takeover target - he previously said that tis just the sort of company he would like to run.

Still not quite convinced, sd, about your calculation of one-off costs. The CEO report says: " ... a significant operating loss for the year of 375K. In addition to the costs of running the holding company, this loss includes significant non-recurring costs including compensation for loss of office and legal fees relating to former direcotrs and also bad debt provisions, mainly for irrecoverable fees and retainers from clients. ... In view of the exceptional items noted above costs exceeded all expectations, totalling over 1.7m compared to 1.3m on continuing operations in 2003."

You may well be right but this does not say that there would have been a profit without the exceptional costs. The costs for continuing oeprations were 609K. There were two new fee-earners employed whose costs would be in the second half so it is probably reasonable to assume that annual costs were round about 1.3m, thus a break-even situation. In relation to the current year, it appears to be implied that the holding company is no longer operational (costs would have been Shaw and Barclay any way) and your on-going cost of 1m would appear reasonable. Recurrent fees are presumably up to 40% of that so they can't be that far from an annual profit already. Understandably cautious, an opportunity to buy, but galling when it seems likely that the sp should already be much higher. Hopefully the AGM will tease this out. Make sure you are there; there's a good dog!

Eric

butane - 20 Apr 2005 14:31 - 408 of 2787

Total traded so far is 1.4 mill.....only 375k are sells.

ptholden - 20 Apr 2005 14:36 - 409 of 2787

I sort of get the impression that the MMs marked this down yesterday in the expectation that the Results would provoke greater sells. It would appear to be a testimony to the confidence of longer term holders that this did not happen. I certainly think that all of the posters interpretation of the Results have been spot on and there was no need or justification to offload. The SP has been very sensitive today to what are relatively low volumes. Augers well for the future, particularly if good news is evident.

PTH

EWRobson - 20 Apr 2005 19:14 - 410 of 2787

A simpler way, perhaps, of looking at the figures. Monthly costs will now be a maximum of 100K and may be as low as 85K: assume 100K. Repeat business is clearly up a third on last year, say 40K per month. OG's figure for flotations is 50K - 100K. Lets say 60K. Then 1 flotation is needed per month for break even. We already have 7 flotations completed this year so are likely to be about +250K for first quarter. OK, market conmditions may have been exceptionally good, but what might CFPs annual target have been, given that they are on target year-to-date. Probably an annual figure in the range of 500K to 1m or a pe of 4 down to 2. Still somewhat puzzled by the conservative nature of the words used in the report. But, first, Rawlinson is the ultimate professional from his track record and language used. Second, I suspect he has a minimum budget of 12 flotations (which gives break-even) and a target of 24. I always took worst-likely-best in business forecasts and that might be 12-18-24. My guess is that he will not say that he is profitable until he has achieved the 12 flotations on the basis that they are not home until they are dry! I think I have the psychology sussed! So, given that there are at least 5 flotations in Q2, he will anounce that they have achieved break-even and the sp will respond a certain amount. By the end of Q3, with, say, 18 flotations under the belt he will start talking about a profit projection of 500k and the sp will soar. He will then deliver 1m and the sp will achieve 4p on a pe of 20.

I am going to print this out so that I will be able to say I told you so! I have 2 and a half million of these little rubies and am going to tuck them away in a 10-bagger bag. What a ramp, eh! Not really, just a well formulated forecast! What do you say, doggie friend?

Eric
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