# FDY - Findlay Securities



## prawn_86 (24 August 2007)

i thought i'd start this one off with a very quick, basic analysis.

please feel free to ask any questions or add any info

*FDY – Findlay Stockbrokers​*
Stockbroking firm – website is out of date.
“Findlay & Co Stockbrokers Limited is a highly specialised and experienced stockbroking firm providing a wide range of services to Institutional, Private, and Corporate clients. The combined skills and years of experience of its members provide a strong foundation for general advice on many types of investment opportunities. Findlay & Co offers quality general investment guidance for all its clients, ranging from sharetrading and placements to complex capital raisings and listings.”


*Structure*

Recently floated.

54mill shares – 70% held by top 20 holders. Therefore low volumes traded, similar to FWL

@ 19c = $10.2mill
@ 25c = $13.5 mill
@ 30c = $16.2mill

2007 annual report put nett assets at $400k and profit at $2.8mill.

Therefore EPS = 5cents per share, indicating price should be around 50c.

*Conclusion*

It seems these guys picked a bad time to float and that now may be a good time to pick some up at 19c and hopefully it kicks up towards its ‘true’ value on the back of better market conditions and more news regarding their earnings/profits etc.


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## prawn_86 (26 August 2007)

has anyone had a chance to have a look at these guys? 

they seem well undervalued in my opinion. current pe is only 4


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## prawn_86 (31 August 2007)

well the companies annual report released yesterday showed that profit was 7% over what was predicted in the prospectus. 

currently have $3mill in the bank and a NPAT of 3.2mill gives an EPS of 5.9c per share.

Strong buy in my opinion as over the long term, with continued good results the market will realise this should be priced closer to 50c rather than the 20c it is at now.

look at EZL for a comparison, its in the exact same industry. Market was slow at first but once steady results and growth came the price has increased by nearly 400% in 2 years.

also is an illuiquid stock, which can be boh good and bad. Good for a long term hold as it will have few sellers, but bad for short term, as a lot of  traders wont get on board.

enjoy! and if no response i promise i wont post any more on these guys!


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## Joe Blow (31 August 2007)

prawn_86 said:


> Strong buy in my opinion




Prawn, please don't refer to companies as a 'buy' or a 'sell'. ASIC consider this to be the provision of financial advice and as you are not a licensed financial adviser you really shouldn't be advising people to buy or sell anything.

If you wish to make a case for this companies future growth, or if you consider it to be undervalued in some way then that is different, and you are welcome to post your views or analysis.

But please, no more 'buy' or 'sell' recommendations.

Thanks!


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## prawn_86 (31 August 2007)

no worries, sorry Joe.

i believe that these guys offer potential growth opportunities which will continue, as was stated today in the chairmans review


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## prawn_86 (12 September 2007)

News that Findlays brokerage income has exceeded $1mill for the month has put a bit of a kick into them today.

One trade of over $100k went through so someone was impressed.

I still maintain the opinion that these are an excellent long term hold and should be trading well above their current prices.


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## stoxclimber (13 September 2007)

Hey prawn,

In my opinion this looks like a very good stock. Explanation follows. Not really sure why people aren't too keen on it.

*Shares on issue: 54,000,000
Market cap @ 21c: 11.34mm*

*Market cap @ 50c: 27mm*

*Core Business*
Brokerage: 70% of revenue
Underwriting: 30% of revenue 


Two good things about these businesses:
1) If you believe in the mineral supercycle then this underwriting revenue is going to keep growing because small cap miners are going to keep issuing rights..and its a really high margin business

2) Days with high volatility are GREAT for brokerage firms..so when you're crying about the 2% All Ords drop, at least you can know FDY is having a good day 


*Value*

Last year FDY made $3.1m
Their market capitalisation is $11.34m (as at close of trade yesterday), AND, it has $3m cash!

*That's a P/E ratio of 3.62!!!!*

And this was not a bumper year that will not be repeated..in fact, brokerage revenue is forecast to rise 15% this year (and is currently beating that expectation)...so there's every chance that next year's profit could be up near $3.6m, a *P/E ratio of 3.15!!*

Its EBITDA (a measure of the profitability of the operational side of the business) for 06-07 was 4.2m...meaning an EV/EBITDA ratio of 1.99; and a *forward EBITDA estimate of 1.87x!!* most MATURE businesses trade at 6-8x, with growth assets trading significant higher...FDY is a growth stock trading at a much lower EBITDA multiple than a mature business!

In my opinion Findlay should be trading at a *minimum of 6.5x earnings conservatively speaking..which implies a price of 43c.* This imo is a quite conservative target..after all it was up in the 30s not long ago.

That would be valuing it as a risky mature business. So it really is a conservative valuation; as you identify there are several growth opportunities, and the business isnt really that risky.


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## stoxclimber (19 September 2007)

Prawn, one thing you forgot to mention which I just found out is:

Findlay own 25 MILLION options in CNF!!

See CNF's annoucement here: http://imagesignal.comsec.com.au/asxdata/20070619/pdf/00730892.pdf

These 25 million options expire June 2010 and are exercisiable at 15c..on today's market price of 20c for CNF, they'd be worth about 7c fair value (including a illiquidity discount) - that's $1.75M worth of options! For this $11mm market cap company that is already trading on a forward P/E of just over 3 and a  forward EBITDA of just under 1.9


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## prawn_86 (19 September 2007)

Possibly the safest undervalued stock i have found. And that was before I knew about the CNF options (thx stox)!

Considering it is already making profits, does not need any infrastructure, does not need expenditure to explore or anything like this, like mining co's need.

Bottom drawer stock. The market has to realise its potential at some time.


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## stoxclimber (20 September 2007)

I agree prawn...FDY's performance is pretty predictable unlike that of a spec miner or so, so it's easier to say with confidence what the fair value of the stock is. Plus all this up down turbulent market activity is great for brokerage

On a bit of a run today, up 12% last traded 23.5


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## nomore4s (20 September 2007)

Good find.

Very promising stock, considering it is making a profit already, has cash in the bank and has the options as well. Seems undervalued, being a newly floated stock in the current market probably hasn't helped it. Could be a good longer term investment.


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## anne (20 September 2007)

I like FDY too.

Nice chart pattern now - a break of a rounded bottom.

One of FDY's directors  has  been  buying  since the  float in July -  he picked up a big parcel on 31 July for 21.5c and even more on 1 September for average 19.6c.

I also  noticed  how similar FDY is feeling to EZL in the early days - EZL was as cheap as chips and caused me no end of anxiety until it finally took off.  FDY isn't as solid a story as EZL was then though. 

FDY is mentioned on HotCopper,  Share Scene and here and everyone makes the same comment -  incredibly cheap so  what's the catch?  

I don't know why they floated so cheaply  - and I don't know who keeps selling.  Why would a canny stockbroker undersell his own company?

Beats me. I've bought in but I'm mighty nervous.

Cheers Anne


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## stoxclimber (20 September 2007)

Hi Anne,

One factor that is contributing is that a significant amount of Findlay's net profit came from underwriting rights issues. If the smallcap miners stop issuing rights due to a downturn in the economy etc., then Findlay's profit would be substantially reduced (although it should still make a decent profit as its brokerage arm is pretty scale-adjustable with lowish fixed costs). Alternatively they could cop it on an underwriting issue if the shares fall but not enough to trigger the opt-out clause.

However, I think these risks still don't justify that cheap a company.


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## stoxclimber (24 September 2007)

Director buying today...seems like the directors agree

Low volume day but not a lot of volume out there for FDY...although obviously the market hitting a record high is good for their business


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## stoxclimber (15 November 2007)

Profit upgrade annoucement today - they are on track for a 50% profit growth..on their P/E of about 4, not bad! Brokerage income was stronger than my expectations, corporate income was obviously low due to low underwriting business over the period, although the Tasman GF IPO seems to be proceeding well - and the GWR/FAS deal if successful will provide a MOUNTAIN of fees for FDY, but it seems a long shot at the moment.


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## Rainmaker2000 (15 November 2007)

Interesting reading the thread......You've reminded me of FDY which fell off my watchlist after it floated so well......although like some of you, I can't believe my luck as I look at the accounts more closely......It appears to be a bloody goldmine.....just further on your PE analysis to make it more ridiculous.....

With last years profit being $3.2, it's about a PE 4........+ 50%...profit should be around $4.5 million which would be forward PE of less than 3....butnever forget the cash holdings which should be subtracted from capitalisation to get a 'pure' PE ration...........apparently, back in end of Aug there was 3 million in cash, now there is more........that brings us close to a PE of 2

I know the market underprices small companies due to their inherent higher risks but this is ridiculous......I actually prefer smaller cause they grow quicker and have more open space to run into...this baby could easily be a 10 bagger.......I would not look a gift horse in the mouth on this......the fact is the 'professional' are not permitted to buy company's as small as this so the regular trading is left to the day traders cause all the smart money has already gone in in the float and just after it.....now they are just waiting for people to discover it.....I certainly hope my order can quietly sneak through the door tommorrow morning


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## prawn_86 (15 November 2007)

Yeh, for a company already in a profit this is very under the market radar imo.

A solid defensive stock to put in the bottom drawer if you ask me.

Plus the more turbulent the market is the more they make. Its kind of like a hedge share


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## stoxclimber (15 November 2007)

Hi prawn rainmaker and all,

I'll be constructing a model of FDY over the next few days, will post it up when I complete. Anyone know if their advisory mandate on the FAS/GWR deal was an active pitch or FAS came to them?


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## gtsman_05 (16 November 2007)

stoxclimber said:


> Profit upgrade annoucement today - they are on track for a 50% profit growth..on their P/E of about 4, not bad! Brokerage income was stronger than my expectations, corporate income was obviously low due to low underwriting business over the period, although the Tasman GF IPO seems to be proceeding well - and the GWR/FAS deal if successful will provide a MOUNTAIN of fees for FDY, but it seems a long shot at the moment.




What???

Profit growth???

It says profit is 50% of FY07... meaning its running at roughly half of last years profits...


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## prawn_86 (16 November 2007)

gtsman_05 said:


> What???
> 
> Profit growth???
> 
> It says profit is 50% of FY07... meaning its running at roughly half of last years profits...




From the ann:


> Findlay's Securities profit for the 4 months to 31 October 2007 , before the expensing of employee share issue expenses,is running at approximately 50% of the profit levels of the 2007 *full year result*




Meaning to me, that in 4 months they have acheived what it took them 6 months to achieve last FY.


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## Rainmaker2000 (16 November 2007)

50% profit growth means a 50% increase on last years profit..........as in, a lot of money for a company with a market cap of 14 million dollars!!!!

I managed to pick up some of these babies in the down market today.....it's remarkably cheap..........I don't really see something like this as a defensive offering....for example, the business has no hard assets......I assume it offers full service broking which is probably little more fickle than discount broking and the corporate side is basically a baby of corporate activity which is cyclical.......................right now......but the company still has earning power outside our current boom

But at these prices, its just outragious.......no hard assets, just wait 6 months for the cash to build up.....

On the mining side, people are paying 20 X Earnings for bloody resource companies....then you have FDY charging sums like 6% + fees +admin fee for underwriting some stock...+2% for advicing..at PE 2, they are more leveraged to the mining boom than the resource companies with none of the risk.......if they allocate their cash flow well, this could be an incredible growth story


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## robandcoll (17 November 2007)

from announcement on 14th November:

The company continues to build up its cash reserves and is continuing to develop growth opportunities, including the potential acquisition of key staff and the establishment of a Melbourne office.


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## Rainmaker2000 (28 November 2007)

Since I've been taking an interest in Findlay, I've been reading quite a bit about the Fairstar/Golden West bid and Findlay's very public no win/no fee arrangement........I got to say its all very amusing, hard to believe and not helping Findlay share price.....I don't know why though, it's bloody fantastic these guys are risking a big pay off, since they are already valued so low.........I just can't wait for them to declare their dividend.....I've never had a 50% yield before...

Check out this article on the deal: http://news.smh.com.au/fairstar-could-sweeten-golden-west-bid/20071128-1dgb.html

It's not every day a floundering gold and uranium miner makes a play for a floundering iron ore player....its not everyday a $28m company tries to buy a $164m company....It's not everyday a useless company like Golden West issues a poison pill share issue of about $36million just to fend off a bid from a company worth $28m......why doesn't Golden West just buy Fairstar and be done with it....hell, the deal already makes no possible sense to start off with.....

Does either of these companies give a damn about their own shareholders?  And now Fairstar has talked about raising the offer.....with whose money? they are already issuing shares to punters to pay for Findlay's advisory fees should they win.......I just can't believe they've already signed up 1/3rd of shareholders while another almost 1/3 have signed Golden West's agreement to say they have no interest in the offer.......this is all a very amusing and dodgy affair whith Findlay's just readying themselves for their first trip to the bank........


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## stoxclimber (29 November 2007)

Rainmaker2000 said:


> Since I've been taking an interest in Findlay, I've been reading quite a bit about the Fairstar/Golden West bid and Findlay's very public no win/no fee arrangement




It's not really no win no fee. If the bid fails FDY gets renumeration of expenditure. If it succeeds they get that + the 2% success fee. That's the standard structure for corporate advisory..all the big boys (Macquarie, UBS, JPMorgan, Morgan Stanley etc.) work on the same structure (although they get less than 2%).


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## Rainmaker2000 (12 December 2007)

Did anyone get sense out of FDY's speech released today....it was like a 2 year old cobbled it together.....I've seriously never seen a one page speech with a released with a significant spelling error....its all passive language too

Apparently 'commission business' is trading well, "Management however needs to focus on current commission levels".........What do people think that means....does it mean reduction in the charges for their services....

How about 'cost control and debtor management are issues we are actively pursuing'.......does that mean that we have accounted for profit on accruals but we are going to downgrade it since we have not seen it come in..........the guy was obviously in a massive rush when he wrote this...

Since I've never owned a stock so cheap, does this mean this is a profit downgrade....heheh....does a profit downgrade matter...

Just on FAS takeover, who thinks the increased bid will get to 50%......surely, it a high probability since they already have 33%....


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## Rainmaker2000 (2 February 2008)

Wow guys, this has to be the dodgiest company and dogiest takeover I've ever witnessed.......I'll be reading the financial statements very closely now, especially the part relating to an AFP investigation of Findlay's brokers...unbelievable........anyone still on this puppy and enjoying the ride......

FDY appears to have consented to underwrite the $40 million worth of falling FAS stock..

For a stockbroker worth about $12 million, I would think that may raise an eye brow.......specially since FAS is worth less than that....now can't wait for that cash flow statement.. .http://www.theaustralian.news.com.au/story/0,25197,23146037-643,00.html


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## prawn_86 (2 February 2008)

This co always did have a bit of a 'dodgy' feel to it. Although the low PE is attractive (under correct conditions)

What I find amusing is how virtually any corporate legislation enforcement almost always falls on the small guys rather than the top 200


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## Rainmaker2000 (2 February 2008)

Yeah, I would have thought the smaller cases would be harder to prove, not easier.........it would appear as if 'trading' was the relevant area......which is actually a very small part of the business although I remember them specifically itemising that part as being a profitable niche....

From a business perspective, it does not make much sense.........why risk so much publicity damage for such a small upside.........It would make more sense if the offence was unauthorised...

Anyway, too early to tell or ponder......perhaps they just seized some documents of interest to the current FAS maneoverings in Federal Crt, but then that would be unlikely...that would be heavy handed


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## blaze87 (11 February 2008)

erm, this might sounds a bit noobish, where exactly does it says it has 56million shares. i check the annual report but it seems to be in a mess and i can't seem to find it. so any1 care to help?


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## Sean K (11 February 2008)

blaze87 said:


> erm, this might sounds a bit noobish, where exactly does it says it has 56million shares. i check the annual report but it seems to be in a mess and i can't seem to find it. so any1 care to help?



All I can find is in their annual report last year, after the capital restructure they were to have 54,462,489 on issue. Page 9. Not sure if anything's changed since then.


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## blaze87 (11 February 2008)

kennas said:


> All I can find is in their annual report last year, after the capital restructure they were to have 54,462,489 on issue. Page 9. Not sure if anything's changed since then.




ty found it, but it was on page 11 and page 44. sigh why do they make it so hard to find such a simple information??


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## prawn_86 (29 February 2008)

Hmmm, takeover offer from Zodiac Capital. Not that good if you have been holding for a while.

Offer is 12c and one Zodiac (NSX) share for every 2 Findlay shares.

If it goes through Zodiac have got a fairly good deal imo.

You still holding Rainmaker??


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## Rainmaker2000 (29 February 2008)

Still holding (regrettably)........my worst buy since CDR but thankfully there has been much rain in between.....

At first I was pretty pissed with the takeover offer.....but then I've come to the conclusion that Zodiac does not intend to and is highly unlikely to take all the shares at what would appear a ridiculous offer.....

So now I actually think its a good thing....provides some support for share price and some suggestion from an insider that there is much value to be had in FDY........and to boot, it will weed out a lot of the punters with Zodiac maybe emerging with a 30-40% stake...

The bottom line is I'm hanging out for the half yearly, as market guidance suggests they are making lots of money and are worth lots even if the share price reacted to the very clear dodginess of the company...clearly, if market guidance proves correct, they are worth a lot of money, even if they are very, very dodgy


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## prawn_86 (3 March 2008)

Well imo, that is a massively dissappointing half year result.

Shows that management cant and wont deliver on promises, I feel sorry for those who hold now.

A loss of $147000, how the hell did they manage that?

What are your thoughts Rainmaker?


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## Rainmaker2000 (3 March 2008)

Well they released their result....when investing, one has no choice but to accept the word of those closest to the situation, management and weigh that against external critique....management after all have fiduciary duty to their own shareholders....

Market guidance from management has been misleading to say the least. In this case, revenue rose largely and expenses rose much more, including a 41% increase in consultant fees paid to client advisors....the accounts are not detailed but they appear to indicate that a)we listed the company and paid ourselves options and incentives b) we decided to pay ourselves more commissions also

I've liquidated my small stake in light of the result and am happy to have the collateral considering the situation. Management has indicated they may require 'external' funding to fund some of their clients debts...but don't worry at the moment, they say.

In light of a takeover bid by part of the FDY management, I wish to have nothing to do with people of such ethic.....and as a sideline am preparing a submission to ASIC

Best of luck all holders....


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## prawn_86 (3 March 2008)

Yes i must say that when i originally looked into these guys, themanagement was the one big question mark, as some people had a lot of negative things to say about Ivor Findlay.

I guess it was a blessing in disguise that i didnt have capital free at the time...


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## Rainmaker2000 (3 March 2008)

Yeah, that's a blessing....I'm happy I classed it as a highly speculative situation only bought a few and was reviewing the situation for more purchases.....it quickly became apparent, more purchases were not required!!!!hehehe

Bottom line is that there is very little difference between corporate crime and petty theft......this is a reminder of that


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## ta2693 (2 June 2008)

Hi mates
Who the hell is Mr. Otto buttula? What is his background? Anyone has any idea?
Once he is on board. the Price of FDY rocket.


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## Rainmaker2000 (2 June 2008)

I'm so sorry I'm sick home from work watching FDY soar to the skies......why ASIC and ASX allows such insider stocks, I have no idea.......

It's now appreciated over 100% in a few trading days apparently cause someone got appointed to a board...what has that got to do with the companies finances....where is the ASX please explain...... fantastic to see the punters have a win and I'll stick to my rather boring but fundamental method


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