Whenever the landscape appears to change for any investment that I am in, I go back and look to see if there are significant changes in the features that prompted me to buy the stock in the first place. I believe that the new brokerage alliances and the aggressive expansion plans for NASDAQ were issues that had to be looked at closely. I am confident that the last few posts have addressed any concerns I might have had.
This company (as with any other) is now all about execution. They have a good business model and how well the company executes on there plans will determine the level of success that they (we) will realize.
With the most recent press releases potentially deflecting the attention away from the core benefits and competitive advantages that SEG is offering, I felt it was time to reassess the many other positives about this company that may have been overlooked. On that note, I have compiled a list of features and benefits that I feel are essential to understanding our investment in CPT.
CPT holds controlling interests in two companies (SEG and CIBT) - Although SEG is very exciting because of its incredible potential, CPT's future does not lie solely at the feet of the successful execution of the SEG business plan. CPT's other business (Canadian Institute of Business and Technology) in China, will be going to list on the NASD OTC : BB in the very near future. This is a profitable business operating in a market that is enormous, which also has a tremendous need for the services that this company is providing. David Wong, the well known analyst from Canaccord Capital, recently mentioned in a Stockhouse article that Online education is just now starting to be recognized as the next big growth prospect and he foresees tremendous growth opportunities in the sector.
The number of Stock Exchanges involved is not restricted? SEG does not need to be limited to the number of exchanges it will be dealing with (how many are there in the world?). Although their initial target was to open up the portal to 40 exchanges around the world covering all stocks on each of those exchange, where advantageous, they could easily extend this number. The NASDAQ Exchanges planned for Europe and Japan will only allow trading in certain stocks that meet all the regulator requirements of all Countries involved. This means that only some of the stocks on these foreign exchanges will be trading on this new exchange. In addition, because of the technology and regulatory issues involved I am confident that it will be several years before the majority of the world exchanges will even be attempting to link any stocks on their exchange to the NASDAQ. So although the NASDAQ will allow trading in some blue chip foreign stocks in the future, the large majority of the world's equities will still not be traded freely on a global scale at a reasonable commission in the near future. . . unless an investor were to use SEG that is <g>
SEG allows an "Offline" Brokerage firm to get "Online" ? Setting up an online brokerage firm is not cheap nor is it easy. This is especially true in countries that do not have strong local IT support. SEG will allow a brokerage firms who don't currently offer online trading to be able to immediately offer this service to their customers.
SEG will be a Value Added Service and not just a place to trade Global Stocks- SEG will be a value added portal which will be much more than just a site for enabling trades on other exchanges around the world. For example, SEG will provide analyst reports from all their partner brokers which will cover stocks from around the world. It is very unlikely that any other firm will be able to come close to matching this specialized type of service since the cost of generating that number of well-research analyst reports would be tremendous.
SEG's value to the Brokerage firms- SEG is sure to be well received by the exchanges as they will be bringing new customers to these brokers and exchanges. SEG's partner firms and exchanges have got to like this arrangement because SEG's advertising campaign will attract new clients for them, and they will not incur the normal costs associated with bringing these new clients. The influx of new customers will seem like a windfall for these firms. They have everything to gain and nothing to lose by signing up with SEG.
It will offer a 24 Hour Service without Middlemen and added up charges- SEG will be providing 24 hour access to both a broker and to technical support. If an exchange is open say in India, or New Zealand, the SEG user will be able to communicate directly with their broker via the Internet, or by phone if required. They won't have to wait to deal with the after hours rep from their own brokerage firm here in Canada, or the US. This after hours rep would then be contacting a brokerage firm in that country (if they even have a partner to deal with), to process your trade for you. SEG's trades will be done directly between you and the Broker partner you choose, in the language of your choice. There will be no middle man (A.K.A. expensive bottleneck) that you will have to deal through.
Size of SEG's Global Market- The size of the global market is staggering. If SEG captures only a very small fraction of the trading action, then this company could be unbelievably successful. For example, as of March, the combined market value of just the Hong Kong, Taiwan, Tokyo, and Seoul exchanges stood at US $5.4 trillion, with total transaction volume of about US $20 billion per day. The recently announced co-operative between the 5 Asian brokerage firms accounts for only US $ 600 million per day. That is approximately only 3% of the total transactions. Based on a very inexpensive commission fee of 0.25% on a daily basis that works out to $100 million a day in commission fees. This $100 million is derived using one buy " one sell. Taken over a year, this works out to approximately US $25 Billion a year in commission fees. Even a very small 0.1% penetration (1/1000) of this market could potential generate US $125 million a year in revenues for SEG. Remember, that is just the Hong Kong, Taiwan, Tokyo, and Seoul exchanges. Remember, SEG is not just focusing on the Asian market, and they have their sights set on the Global market. I initially thought that that number was too high until I validated it with a quote from a CPT Feb. 29/2000 news release. In this release they state that the 14 Asian stock exchanges that SEG is initially targeting are expected to generate 600 million transactions in 1999 (last year). Using these projections from last year (and discounting the explosive growth in on line trading that has taken place over the last year) take 600 million trades and times this by an average commission charge of say US $30, then this works out to US $18 Billion. Now taking the updated year 2000 numbers that were just calculated to estimate the market size, then if this market accounts for $25 Billion in commission per year, think about what the total world market is! Put into terms like these, yes it is safe to say that this market is staggering and so is the potential for what SEG is doing.
Data Management- SEG will be in a prime position to collect (in a non invasive way), analyze, and leverage the data base it will have on its customer base. For example, which class of customers from which countries are most interested in funding new telecommunication companies. This information can help to streamline information to the SEG clients who would be most interested in seeing this type of information or offering.
Expanded Product and Service Offerings- SEG has plans to become a total financial portal. Their horizon is not limited to only dealing in equities. They have made it clear that they will be expanding into offering a suite of financial products and services to their customers. For example, in SEG's investor package they talk about expanding into the Futures, Options and Currency Exchange services. Although we have been concentrating on SEG's role in the equities markets we shouldn't forget the global Currency and Futures markets are several multiples larger than the global equities markets.
New Company Funding- SEG will be providing an outlet for new companies who are floating their IPO's to use the site to solicit interest in their offerings. The fee's for offering this service (and any equity positions that SEG may take for funnelling money to these companies from their user base) may soon become a significant source of revenue or short, medium, or long term assets. The ability to participate in early stage IPO's will also prove to be of interest to many SEG users.
Advertising Plans- SEG is planning an aggressive global advertising campaign to create a Brand name for their service. This advertising will no doubt bring a heightened awareness and client base for SEG. In addition, this advertising campaign will also act as "free" promotion for CPT which should help to increase the share price.
Advertising Revenues- Given the global nature of this site, I believe that the potential for advertising revenue is staggering.
1st to Market Advantage- SEG is well into the execution phase of their business plan. Other competitors seem to be just beginning their business model development stage. As a result, SEG should retain a true first to market advantage that could last for an extended period.
Management Strength and Depth- SEG has a management team which holds a track record of success, and who are extremely well connected throughout the world.
Loyalty Program- Where applicable, SEG will be establishing a loyalty program that will reward investors who use their site and make trades. This loyalty program will ensure that a good portion of the visitors to the site stick around and become long term users.
Access to Research Analysis- As mentioned earlier, SEG portal users will be able to access the research reports each of the participating brokerage firms have prepared on the specific stocks trading on their exchanges. Due to the shear number of participating firms, and the amount of reports, this should provide a wealth of information that will not be available anywhere else.
Know your investments- As the Brokerage firms from each of the countries will no doubt be involved in the under writings of listed companies on their exchanges, these firms should be able to explain the merits and concerns of many of the stocks an investor expresses an interest in. The SEG client will be opening up a trading account with those brokers, and as such should be able to expect better service and information than they would by making a trade through a N. American based firm who has no connection or alliances with a firm on these exchanges.
Win / Win / Win Business Model- There is no downside for the participating Brokerage firms and Stock Exchanges. They will see an increase in new accounts and transaction volumes. Their firms and exchanges will be opened up to investors around the globe, and it hasn't cost them anything in return. The investors will be able to participate in rising markets around the world and diversify their portfolios and holdings to minimize the volatility that comes with being tied too closely to one part of the world's economy. Companies will benefit (especially new ones) as they will have access to new avenues of financing (via IPO's etc.). It is also important to note that much of this money would be of a longer term nature. This is the best type of financing that a company could hope for.
Buyout Target- Should this company gain a firm footing and prove that it is indeed a value added portal, it has established a loyal following, and it is enhancing the transaction flow to their brokerage partners, then I would not be surprised in the least to see a large Bank or Securities firm make SEG a substantial buyout offer within a year. If I owned a bank and had aspirations for establishing a Global presence, that is what I would do. Why take the time to build what is already there. Buy a successful business that already has a world wide network and a loyal and growing customer base.
Crazy Canuck |
