Logistics Development Share Discussion Threads

[dave-w] 24/4/2006 15:52

Just been offered these for 12p by PCS. (Immediate profit of 0.25p!!) "Trading below NAV of 13p per share." they said. Profit last year $1.3m. Estimated profit next $2.3m. Quite adamant on this. Q2 2005 must have been pretty impressive for an unchanged company then! Clearly a yawning gap somewhere here.

I queried the NAV and they said these are the company's latest figures. Suggestion was that the increase in NAV is solely due to the float proceeds and that they now have the resources to proceed with the ambitious acquisition strategy of the new management, "who have been previously associated with successful company expansions".

I also queried the history of the company. The broker said "they have always been Legacy but private up to now"! He also professed to know nothing about the pre-float share issue. (not that it didn't happen but that his notes start with the AIM float, which is pretty obvious.)

He wasn't pushy but is trying to get me on board as a new client. "We want to offer you this to gain your confidence"

They met the management immediately pre-float and apparently acquired their shares directly, which is consistent with "paid to sell" comments above. No mentionof Corporate Synergy.

I cannot see how in the cut-throat US distribution business (even with Phillip Morris and an up-coming Wal=Mart competitor contracts "nationwide...not just Arizona") that the aggressive strategy is a forgone conclusion by any means. Coupled with adverse PCS reputation and inconsistencies in data, I don't think this one is for me.

[crosstalk] 24/4/2006 11:57

I was first offered RC Group (RCG) by First Cape Securities (FCS). FCS are based in South Africa and are not regulated by the FSA, but neither are they on the FSA list of unauthorised foreign firms, yet. FCS funnelled all the paperwork through Pacific Continental Securities (PCS) perhaps this was how PCS became more aware of it. Later PCS themselves recommended RCG. RCG does not appear to be the normal type of PCS recommendation.

Had I taken PCS's recommendations in the past I would probably have been bankrupted long ago and never been able to partake of the 50% rise in RCG. There is no PCS recommendation, given to me, that would have resulted in a gain after a period of about 6 months. There have been short term gains as stock prices has been pumped up, but beyond 3-6 months everything has gone down. RCG may be the first PCS recommendation I know of to achieve a gain after any period of initial euphoria.

Look at The Motley Fool website under the "Financial Scams?" thread for more details about the activities of boiler rooms and a few FSA regulated companies that have many of the attributes of boiler rooms and lose a lot of money for their clients:

In particular look at the FAQ:


I believe PCS are paid substantial fees (in addition to the normal brokerage fee that the private investor pays) to sell some of their recommendations. They also have opportunites to get stock cheaply through placings which they then sell on to private clients.

[mr_chaps] 24/4/2006 11:13

thanks crosstalk,

>meerzaf - I mentioned that Pac Con had 'done me right' with RC but, IMO, that Pac COn are pushy and that I don't think all their recommendations should be taken with out some of your own analysis. See post 11,

[crosstalk] 23/4/2006 16:52

from mr_chaps - 12 Apr'06 - 10:41 - 14 of 21

"Incidentally Pac Con came back to me and I queried that I had seen it seemed to have falling income and made a loss last year as per Crosstalk's post 8. the guys said it made profits of GBP 900k lsat year, I asked if he had a copy of this report to forward to me and he said it wasn't worth his time".

The reason it wasn't worth his time is because he was lying. Lying is a characteristic of a 'boiler room', but I do accept that Pacific Continental Securities is FSA regulated and therefore cannot be called a 'boiler room'. I have checked my post 8 and the profit figures quoted are correct. The source is given. I will also quote from page 10 of the Admission document:

"PART I
INFORMATION ON THE GROUP
...
7. Financial Information
The following information, has been extracted without adjustment, from the financial information on the Group set out in Parts III, IV and V of this document. Investors should read the whole of this document and not rely solely
upon the information summarised below:
...
.....................................................Six months ended
.....................................................30 June 2005
.....................................................$ '000
...
Profit/(loss) of ordinary activities before tax (133)

The Directors believe 2005 has been a year of transition for the Group. ..."

Pac Con Sec sent me this document. They did NOT make a profit last year of £900k. I rest my case.

The document in question is:
"Legacy Distribution Group Inc.
Admission to trading on AIM
Nominated Advisor and Broker:
Corporate Synergy Plc"

Corporate Synergy's telephone number is 020 7920 9641. Please call them and ask them to send you a copy. Having checked you could always write to the FSA and tell them Pacific Continental gave you incorrect and misleading information.

If anyone thinks I have got this wrong then please quote the evidence and source. If substantiated I will apologise most humbly and issue a correction.

[3frog] 16/4/2006 14:28

nmf777

Already done so. Printed it out and sent it to Pac Con with a not so nice letter.
Don't think they'll bother me again.

But thanks anyway.

[nmf777] 15/4/2006 19:16

to all interested parties,

please please take a look at the Pac Con thread on boiler-rooms.co.uk before proceeeding any further. nuff said.

[meerzaf] 13/4/2006 15:04

Well I for one cant complain. PCS bought me RCG and I am 70% up on it. I can only thank them.

[3frog] 13/4/2006 13:01

JakNife

My feelings exactly.Feel that Pac Con are more interested in selling their recs for good kickbacks and to hell with the INVESTOR

Bought some RCG anyway.

[meerzaf] 13/4/2006 10:54

Well PCS bought me RC Group and thats roaring so Im not sure why you are all so sceptical about their credentials. I had not even heard of RC then and now im pretty pleased that I got in.

[3frog] 12/4/2006 11:31

Thanks for info..............mr

[mr_chaps] 12/4/2006 10:41

>>3frog - 11 Apr'06 - 16:13 my understanding is that it is NOT a restricted stock since it is AIM listed.

Incidentally Pac Con came back to me and I queried that I had seen it seemed to have falling income and made a loss last year as per Crosstalk's post 8. the guys said it made profits of GBP 900k lsat year, I asked if he had a copy of this report to forward to me and he said it wasn't worth his time. (it is however worth his time to have continued to send me cuttings about RCG which I agree has been good for me (I bought around 33p)

.........to 30/6/2005...to 31/12/2004....to 31/7/2004.......2003.........2002
................$.............$..............$...............$............$
Net income..(133,002).......21,390........190,553.........209,393......544,692

[3frog] 11/4/2006 16:13

Just been called by Pac Con to buy LDG at 13p. asked if it is a restricted stock, told 'no'. is that true? am suspicious about US stocks.
opinions will be appreciated.

[edjgee] 10/4/2006 13:09

Apr 7 Pac Con still offering, just smelt a rat on this one, RCG a previous recommendation came out well but could have been bought much cheaper later. Cancelled this sort of selling attention now.

[mr_chaps] 06/4/2006 11:22

Pac Con are offering them at 13p to buy this a.m. - thanks for the research you have done above Crosstalk. I think I'll give this one a miss for now, I suggest you all have a look at the Pac COn thread to make your own decisons

[Abuse team] 18/3/2006 16:08

Post removed by ADVFN

[jonwig] 18/3/2006 07:58

Hi Crosstalk.

First of all, I've been trying to find more company details, such as a website or the prospectus online which you're quoting from.
I can't even find a website, though I must admit I haven't looked far.

From my knowledge of new AIM issues, the awarding of free or discounted shares pre-float is (or was) not unusual, though mostly confined to cash shells. An example of this was SovGEM [SOV] which floated from scratch at 55p, and an initial NAV of 12.7p. Actually, that became a decent investment once the share price had corrected itself down to about 9p.

So LDG may just be following a well-trodden route - and no wonder they didn't try it on in the States!
But it does call into question the stated aim of the company to use its paper for future acquisitions.

Your figures (which I haven't checked closely) suggest the share price will settle down rather lower than it is now!

[crosstalk] 17/3/2006 23:56

The 66 page "Legacy Distribution Group Inc. Admission to Trading on AIM" document dated 10 March 2006 makes interesting reading.

NB All $/£ conversions are at $1.75/£

From page 13:
"17. Pre-admission funding
Prior to the introduction of Legacy to trading on AIM, the Company raised $1.54 million from existing shareholders. The proceeds of the funding were used to settle amounts due to previous shareholders and to provide additional funds for working capital for the Group".

From page 24:
"On 1 August 2004, Best Holdings acquired 100 per cent. of the outstanding shares of Best Candy for aggregate consideration of $5,405,000". [In Jan/Feb 2006 Legacy and Best Holdings merged, Best Holding then ceased and Legacy continued as the surviving corporation assuming all BH's rights, assets & obligations etc]

From page 28:
"CONSOLIDATED BALANCE SHEETS [For Best Holdings, now Legacy]
.......................................30 June 2005,$[....£,million]
...
Total current assets.....................4,557,395[........2.604]
Property and equipment, net................967,477[........0.553]
...
Total other assets.......................2,087,359[........1.193 see note 1]
TOTAL ASSETS.............................7,612,231[........4.350]
...
Total current liabilities................4,959,313[........2.834]
Notes payable, net of current portion....1,614,900[........0.923]
...
Total members' equity....................1,038,018[........0.593]
TOTAL LIABILITIES AND MEMBERS' EQUITY...$7,612,231[........4.350]"

note 1 - this figure includes $1,502,378 (£859k) of goodwill

From page 44:
"2.2 The Company's authorised and issued share capital as at the date of this document and, following completion of the Admission will be as follows, all issued shares being Shares of Common Stock and fully paid or credited as fully paid:
.....Authorised...............................Issued
................................Pre Admission............Following Admission
.Amount.......Number.........Amount.......Number.........Amount.......Number
$500,000...550,000,000.....$73,446.33...73,446,328.....$73,446.33...73,446,328"

From page 46:
"3.19 In preparation for the Admission, Legacy implemented a reverse stock split on 9 March 2006 whereby every 3.385 shares outstanding prior to 9 March 2006 was reclassified and converted into one share of common stock. As a result of the reverse stock split, the number of shares outstanding at 9 March 2006 was reduced from 132,222,390 to 39,061,269".

From page 53:
7. Interests of other major shareholders...
Shareholder........At admission......Percentage of issued Share Capital
George Aliferis.....30,112,994....................41.0%

From page 61:
"(iv) Lock-in and Orderly markets Arrangements
At admission the Directors will be interested in and aggregate of 11,928,286 Ordinary Shares representing 16.2 per cent. of the share capital of the Company. The Directors have entered into an agreement with the Company and Corporate Synergy only to dispose of their interests in Ordinary Shares with the consent of (which is not to be unreasonably withheld) and through Corporate Synergy for a period of twenty four months following Admission, to ensure an orderly market in the Ordinary Shares.

The orderly market arrangement as described above has also been signed by certain other shareholders, other than the Directors, with 52,704,482 ordinary shares representing 71.8 per cent of the share capital of the Company".


From p46 we know there were 39.1m shares in issue on 9 March.

From p44 we know there were 73.4m shares in issue on 10 March.

Therefore 34,385,059 new shares (an increase of 88%) were issued between 9/10 March.

From p13 we know $1.54m (£0.88m) was raised in a pre-admission funding exercise.

At $1.75/£ this means each share was placed at about 2.56p just a week ago.

From p24 the company was bought for £3.1m in Aug 2004.

From p28 current liabilities is 109% of current assets (at 30 June 2005) - this is not healthy.

From p28 shareholders' equity (total assets minus total liabilities) is under £0.6m at 30 June 2005. The fund raising produced £0.88m in March 2006. So shareholders' equity is up to about £1.5m. With 73.4m shares in issue the net asset value per share is about 2p.

Can anyone more knowledgeable than me please explain how a company that:
i) was bought for £3.1m in Aug 2004
ii) had net asset value < £0.6m on 30 June 2005
iii) issued shares 1 week ago at 2.56p (according to my calcs) to raise £0.88m
iv) therefore had net asset value of about £1.5m last week (according to my calcs)
v) has a net asset value per share of about 2p (according to my calcs)
now has a middle market price of 13.75p and a market cap of £10.1m?

Have I missed something?

From p53 and p61 I would guess that George Aliferis and the Directors will be leaking their shares out as fast as they can (in an orderly fashion). The 12% who have not signed the agreement with Legacy/Corporate Synergy may be getting rid of their shares even faster. These are the shares that Pacific Continental Securities are now selling.

Pacific Continental Securities told me that 72m shares were issued this week at 10p. Both aspects of this statement were false.

Yesterday PCS were offering these at 12p. A few buys yesterday pushed the share price higher and today PCS were offering them at 13p, then 13.75p later in the day I think.

Draw your own conclusions. Any corrections welcomed.

[jonwig] 17/3/2006 06:33

Crosstalk - Pacific Continental - are we to bracket them alongside City Equities and Hoodless, then?
I must admit I'm not acquainted with these P&D merchants.

Ah - here's something, confirms what you've said.

[jonwig] 16/3/2006 19:43

IC (17 March 06) have a sceptical article - we'll see. But they make a very fair general point:

The tide of Aim floats continues unabated. Today's arrival is Legacy Distribution, which distributes tobacco, 'candy' and other goods to small grocers in Arizona.

The bigwigs at the stock exchange will be rubbing their hands with glee. They're desperate to get more US companies to float on Aim (think of all the potential listing fees involved), and Legacy is just what they want: a domestic US business floating in London rather than a US market because it's cheaper, quicker and less bureaucratic. The company says that the decision to go for London rather than New York, thus avoiding all that Sarbanes-Oxley nonsense, will save $1m and 12 months.

Legacy is, no doubt, also very pleased. It wants to make acquisitions and incentivise staff, both of which will be easier when it has publicly traded shares (although whether lorry (sorry, truck) drivers in Arizona are excited at the prospect of having Aim-traded shares in their 401k is anyone's guess).

But how well Legacy will be received by the London investment community is a different matter. There's nothing wrong with the business – it's been profitable for 20 years and it has decent expansion plans. The potential problem is that the Arizona grocery distribution market is not one that's deeply understood in London, and few UK investors are likely to put a lot of time and effort into understanding it. The investment thesis behind Legacy – growing through acquisition, adding volume to a fixed cost base, and winning market share from larger operators – is available through countless other companies in markets closer to home

This issue will grow in importance as Aim rolls out its plan for global domination. UK investors have a critical role – will they embrace the growing (and often esoteric) army of overseas companies with enthusiasm, or will they instead focus on the UK options, abandoning the foreign companies to a fate of feeble liquidity, drifting share prices and general investor disinterest?

[Abuse team] 16/3/2006 19:41

Post removed by ADVFN

[jonwig] 16/3/2006 19:41

I've no idea what to make of this - opportunism or opportunity?

Worth a bit of research, anyway.