AXXel Knutson's Market Flash
?LONDON PACIFIC GROUP?
[getting at the internet IPO?s
through the back door]
VTAR?
[?Volume Trade Analysis Research??]
?Manage the risk?the profits will take care of themselves?
"In this business, being right is not as important as making
money?consistently, and one of primary tenets of the quest is the
avoidance of the 'obvious risk'"
From AXXel Knutson,
EVP & Director, Institutional Equity Research
Platinum Equities, Inc.
Member NASD & SIPC
80 Pine Street-32nd Fl-New York City 10005
Email: vtarmail@aol.com
Telephone: 800-696-9002 or 212-271-0075 FAX: 212-271-0092
Platinum is not yet registered in the states of AR, ME & the
Commonwealth of Puerto Rico and we are not currently in a position to
service your investment needs in those jurisdictions. We clear our
securities business through RPR Correspondent Clearing, a division of
Dain Rauscher Inc.
Trading Engine? VTAR? [Volume Trade Analysis Research?]
Trade and service marked by and owned by Axxel Knutson and is licensed
to Platinum Equities, Inc. under revocable license. ¸ 1999 all rights
reserved, Axxel Knutson
We are recommending, the immediate accumulation of the ADR?s of London
Pacific Group [NASDAQ: LPGL-19]. [Special note: Platinum Equities has
owned for over 60 days, a small investment position in the company that
it purchased in the open market. Platinum has no investment banking
relationship with this company nor does it expect to in the future.]
London Pacific Group Limited invests in later-stage venture capital
companies in the US with a focus on Internet technologies. The Group's
life insurance company is the primary funding source for these
investments. When combined with the Group's investment management
businesses, assets under management or administration were $4.3 billion
at 30 June 1999. ] It has in its portfolios a number of very
interesting Internet investments, some of which have already come to
strongly benefit shareholders. The most important of which is
Netgravity [IPO?ed and then acquired ðin process- NETG-34 2/16]] by
Double Click [DCLK- 122 7/8]. Two other positions a completed IPO, Ramp
Networks [RAMP-23 13/16] and NetPerceptions NETP-18 «] with two in
registration Packeteer and Continiuus. XLNT, a position, was acquired
by Intel and another announced acquisition, TransMedia by Cisco [CSCO].
IT?S TECHNICAL VTAR POSITION:
The stock has a long-term base of 12-14 going back at least 24 months
and a rather massive spike to $30 in April of this year during the
height of the Internet IPO fever. Since that time the stock has given
nothing but repetitive sell signals and has drifted ever lower and has
now reached the teen again, if effect giving up about 75% of its power
move $14-30. That is about typical for this kind of move and now is the
time to consider purchase of the stock.
This does not preclude the potential of one final ?blast? to the
downside [surely it can happen] but we think that because of the length
of the consolidation, about six months, the extent of the price
deterioration, about 75%, that accumulation at current prices is very
much warranted.
iqc.com
THE FUNDAMENTAL POSITION
Here are the six-month figures:
LONDON, Aug. 2 /PRNewswire/ -- London Pacific Group Limited (Nasdaq:
LPGL) today announces its results for the six months ended 30 June 1999.
-- Profit before taxation increased to $59.1 million for the half
(1998: $19.2 million)
-- Profit after taxation increased to $40.1 million for the half
(1998: $14.5 million)
-- Diluted earnings per share were 74.1 cents (1998 as restated:
25.4 cents) or $2.96 per ADR (1998 as restated: $1.02)
-- Net asset value at the end of the period was $413.3 million
($6.41 per share or $25.64 per ADR)
-- Interim dividend per share held at 11.0 cents (gross):
8.8 cents per share (net) or 35.2 cents per ADR
We think that the company is putting in a very good performance as it
runs off old private debt in favor of venture capital with an emphasis
upon the Internet sector. Here is a statement by the company?s Chairman
which is not full of puff and states the company?s situation very well
and points out the fact that it is impossible to produce estimates going
forwards when the portfolio is made up of such highly charged internet
stocks that even he cannot foretell which ones will be the best
performers.
Arthur I. Trueger -- London Pacific Group Limited (Nasdaq: LPGL)
Executive Chairman's Statement
LONDON, Aug. 18 /PRNewswire/ -- The following was issued today by London
Pacific Group Limited:
I am pleased to report to shareholders on results for the first half of
1999. Operating income rose substantially from $24.4 million to $61.1
million. Profit after tax grew from $14.5 million to $40.1 million.
This produced earnings per share increase from 25.4 cents to 74.1 cents.
The interim dividend will remain unchanged at 11 cents gross (8.8 cents
net) per share paid to shareholders of record as of 13 August 1999.
These results reflect buoyant equity markets, a policy of recognising
unrealised gains into income, and the decision write-off or reserve for
losses in the old non-technology investment portfolio.
The first half saw an unprecedented amount of activity in our technology
venture capital holdings. We completed two IPO's: Ramp and Net
Perceptions two new IPO filings: Packeteer and Continuus; one completed
acquisition: XLNT by Intel; and another announced acquisition:
TransMedia by Cisco. We wrote-off one investment, Avirnex, and reserved
for another. In addition there were extraordinary costs associated with
one of our troubled companies where we had earlier anticipated a full
recovery of principal.
At the time of this writing the new listed technology portfolio consists
of five companies:
Netgravity, Net Perceptions, Ramp Networks, Packeteer and Continuus.
Netgravity recently agreed to be acquired by its larger competitor,
Double-Click. This is a transaction where we will receive stock rather
than cash. Our policy is to hold these positions for the longer term,
especially in the insurance company, except where a management or
ownership change cause us to lose close touch or where there is a need
for realised gains in connection with insurance regulations of statutory
capital.
The insurance company (London Pacific Life & Annuity Company) is an
ideal long-term investment vehicle. It is now at approximately $1.4
billion in assets and marching towards its strongest year in terms of
new premium growth. Capital gains, realised or unrealised, enhance its
net statutory capital and pave the way for rating improvements. Ratings
are important to the selling process for annuities. Premiums provide
cash for new investments. Premium growth is propelled by competitive
returns to policyholders permitted by good performance in the bond and
equity portfolio. It is a virtuous circle. We are also
attempting to expand our channels of distribution to increase premium
growth more significantly next year and beyond. Our internally generated
growth is strong.
Similar growth is occurring in other operating entities. Berkeley
Capital Management (BCM), our fund manager, raised approximately $266
million in new assets under management this half. This reflects good
investment performance in the Equity Income investment product and the
growing strength of our distribution through wirehouses. Morgan Stanley
Dean Witter and PaineWebber continued to be the largest with other
brokers increasing their participation. BCM anticipates a record year
and currently has grown its equity assets under management to in excess
of $1 billion.
Select Advisors, Inc. (SAI) grew well in the first half, with assets
under management or administration increasing. It distributes through
wholesalers recruiting brokers who wish to leave wirehouses and become
fee based fund managers. SAI provides a systems, regulatory, and product
umbrella for such individuals. It also offers a wide range of services
evaluating portfolio performance by various mutual fund managers. Such
tools are much sought after. SAI is also adding to its client assets
under management and has a number of products with exceptional
investment performance. As SAI's services are increasingly developed we
anticipate accelerated growth. The potential of this distribution
channel with its 200 broker advisors today and more tomorrow is
considerable.
The venture capital investment programme and the other private equity or
debt portfolio assets are managed by Berkeley International Capital
Corporation in San Francisco. This is the entity that fights a daily
battle to source quality venture capital transactions and oversees the
old private debt portfolio. Its efforts have produced extraordinary
successes. Some of this is due to unusual equity market conditions for
Internet related stocks. It is unclear how long these high valuations
will last. Regardless, we will continue to invest in good later-stage
operating companies which will create longer term shareholder value in
good markets and bad.
Preserving value is the objective as we run off the old private debt
portfolio where higher interest rates were previously essential to the
early growth of the life insurance company. We are still exposed to
concentration risk here, with two large positions underperforming.
Although the company has substantial gains at this time to offset
potential losses, we would prefer not to have to use them. This is a
business we are de-emphasising in favour of venture capital.
Besides being a highly publicised sector, the returns being created in
the Internet private equity market are large. It is hard to imagine any
other sector where one could do so well so quickly. What is happening in
Silicon Valley is unique in terms of massive wealth formation. Value is
truly being created as new distribution models are invented for the
Internet. Money has cascaded in creating a viciously competitive
environment for quality transactions. Despite this we are competing
successfully and the intention is to hold on tight, ride the tornado,
and pursue this exceptional opportunity. It is available nowhere else in
the world.
As a part of this, our Company recently received more recognition as an
investor in the Internet sector. Investors seem attracted to our longer
term holding strategy through an insurance company vehicle, as well as
proximity to Silicon Valley and later-stage investment focus. The
Company received an unprecedented amount of analysis through various
channels much of it penetrating and insightful.
Recently, brokerage cover was initiated by Friedman Billings with
another brokerage house report soon to follow. This is a very difficult
business to analyse and predict. Forecasting gains and losses in a
portfolio on a stock by stock basis is almost impossible, especially
when the portfolio is large and diverse like ours. One is often
surprised by which stocks are the biggest winners and losers. The
Company cannot and will not forecast its earnings.
What I am confident of is our ability to build value over time with the
current strategy Despite exposure to market volatility, we are doing
business in a wonderful area. The timing and precise amounts will defy
analysis and prediction, but the end results should be extraordinary. I
invite shareholders and potential investors to watch and enjoy our
progress. We are slowly and carefully increasing the public and
institutional profile of the Company, as we become more confident that
the old debt portfolio issues are less important. As the Company
accelerates we will continue to expand that profile, perhaps at some
point with a larger, more high visability, technology related
transaction. There is nothing like a significant
event to attract investor interest; and market swings together with our
growing capital may create opportunities difficult to ignore.
Arthur I. Trueger, Executive Chairman
SOURCE: London Pacific Group Limited
Chart is courtesy of www.iqc.com
DISCLAIMER
Investment decisions should not be based solely on our proprietary
indicators, which are intended as an adjunct to your additional
analysis. Please accept these comments as market commentary. We do not
intend these comments to replace detailed fundamental analysis. We urge
you to accomplish that additional research via your contacts on the
Internet or through a trusted financial advisor. If you want additional
information, we will give it upon your request.
This report has been prepared from original sources and company data we
believe to be reliable, but we make no representation as to its accuracy
or completeness. Additional information is available upon request.
This report is published solely for information purposes. It is not to
be construed either as an offer to buy or sell or the solicitation of an
offer to buy or sell any security or the provision of or an offer to
provide investment services in any state where such an offer,
solicitation or provision would be illegal. Any opinions expressed
herein are statements of our judgement on this date and are subject to
change without notice and we may not update that change to you.
Platinum Equities, Inc., its affiliates and subsidiaries and/or their
officers and employees may from time to time acquire, hold, or sell a
position in the securities mentioned herein.
The author of this report, Axxel Knutson, does not invest in any of the
securities mentioned in this report nor does his immediate family unless
such securities are included in mutual funds or index options. Equity
investment involves risk of capital loss. We recommend that your
portfolio be diversified by company size, industry group, geographic
region and by currency.
It should not be assumed that future selections will be profitable or
will equal the performance of past selections. Securities listed herein
illustrate selections made using proprietary indicators know as VTAR?
[Volume Trade Analysis Research?]. These names, VTAR?, Trading Engine?,
tradingengine.com?, Volume Trade Analysis Research?, are
servicemarks/trademarks of AXXel Knutson and are given under revocable
license to Platinum Equities, Inc. ¸ 1999, All rights reserved, Axxel
Knutson and Platinum Equities, Inc. Diversify. Got it?
All recommendations and commentary are directed toward sophisticated,
aggressive traders who have significant experience trading in a volatile
market and who possess the financial resources to risk a loss of some or
all of their invested funds. Commissions, and if you use margin,
interest charges will lessen any return on investment. VTAR [Volume
Trade Analysis Research] centers around the proprietary analysis of
trading volume, price, general fundamental analysis, beta concerns,
group rotation and detailed analysis of risk as it relates to entry and
exit points in highly liquid stocks. Control the risk?the profits will
take care of themselves? AXXel Knutson |
