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Theodor Tonca
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Mere mensch, investor (Chairman & CEO of Graham Theodor & Co. Ltd.), and an all around nice guy.

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  • Company Analysis 0 comments
    Nov 20, 2010 11:23 PM

    Qualitative Analysis

    Company Overview

    Founded: Dec. 21, 2007

    Headquarters: Boca Raton, Florida

    Employees: 31 (As of March 31, 2010)

    Ticker Symbol: OTCBB: BDCG Inc. operates a web based electronic trading platform for fixed income securities which is used by both individual and institutional investors to trade fixed income securities including municipal bonds, corporate bonds, US Treasury securities, agency bonds, emerging market debt, mortgage backed securities as well as CD’s.

    The company's products are:

    • BondStation (Proprietary trading platform for retail investors)

    • BondStation Pro (Proprietary trading platform for institutions)

    • CD-Station (Technology platform which allows banks to issue brokered CD's)

    These three electronic trading platforms provide users with basic functionality such as real-time executable bids and quotes in addition to other features.

    Revenue Model Inc. is a FINRA registered broker-dealer. These registrations are required to conduct their business of providing clients with their BondStation, BondStation Pro and CD-Station electronic trading platforms.

    As such, the majority of the company’s business is derived from mark-ups on secondary market securities and sales concessions on primary issues relating to trading of fixed income securities on their electronic trading platforms.

    The company also generates additional revenues from the:

    • issuance of new CD’s by purchasing these from issuing banks at a discount and then selling such CD’s to clients at face value.

    • Private labeling of their BondStation electronic trading platform to select partners.

    This revenue model contrasts with the traditional online brokerage model of charging clients a monthly subscription fee or transaction fees per trade executed. Since the company's revenue model is relatively new it is hard to evaluate its economic viability at this time.

    Management Team

    • Michael Sanderson, CEO Prior to joining Group Inc. Michael was the CEO of NASDAQ Europe and before that CEO of Reuters Americas. In addition Michael is also the former CEO of Merrill Lynch Canada.

    • Jeffrey Chertoff, CFO Before joining Group Inc. Jeffrey was the CFO of Cantor Fitzgerald.

    • George O'Krepkie, Senior Managing Director Mr. O'Krepkie acts as head of sales and trading. Prior to this Mr. O'Krepkie was the head of dealer relationship management at MarketAxess.

    Together executive officers and directors own approx. 83% of the company's common stock.

    Needless to say this is a very experienced senior management team with deep knowledge of the
    markets which they serve. While this is the case, I cannot comment on the collective integrity, vision and drive of the fore mentioned individuals as I have not had the pleasure of speaking to them or their associates. I consider these characteristics to be the determining factor, above all else if a business is to be successful in executing their strategy in the long term.

    Industry Overview

    Industry: Financial Services

    Sector: Brokerage operates in the brokerage services sub-sector of the brokerage industry. The company participates in the well defined niche of fixed income brokerage services. Their primary competitors in this niche are:

    MarketAxess Holdings Inc.  TD Ameritrade Inc.   The Municenter LLC.              

    Bond Desk Group LLC.       Tradeweb LLC.

    Additionally also faces competition from online brokerage services providers and banks that provide online trading platforms. While the majority of online discount brokers and banks do not provide access to the fixed income securities market, there is a distinct possibility that they may do so at some point in the future.

    Quantitative Analysis


    • P/E: 0.11

    • P/B: 0.07

    • P/S: 4.3

    • P/CF: -2.0

    • Div. Yield: -

    Looking at the above figures from a value standpoint, the P/E and P/B ratios certainly meet conservative criteria, but the P/S ratio is well above the 2x maximum which is sought.

    • EV/FCF: -0.43
    • Price per share: $0.12
    • Fair market valuation: $7,560,000

    Using the simple enterprise value (Market capitalization + debt) formula we find that the company's  current EV/FCF ratio (Enterprise Value/Free Cash Flow) is negative.  The price per share and fair market valuation figures discern what an informed buyer would  reasonable pay for the business in an all-cash private market transaction. This figure is below the  current stock market valuation of $0.18 per share and market cap of $13,800,000.

    With that said, Group's stock price was $0.13 as recently as Nov. 16 which entailed a market valuation of approx. $8,190,000 still overvalued but just slightly above what could reasonably be deemed a fair market valuation.


    Without going into an extensive top down macro-economic look at the industry and markets in which the company currently operates, which would only add further uncertainty as to the economic viability of the company given the deteriorating economic condition in the domestic United States equity and fixed income markets. It can reasonably be discerned using a simple screen such as EV/FCF that the company is currently intrinsically overvalued.

    However, given the company's recent increase in top line revenue ($3 Mil. in fiscal year 2009 from fiscal year 2008) and the fact that most of the company's operating expenses are decreasing year over year it can be said that the company may be a turnaround situation.

    As Benjamin Graham once said: “Every company is overvalued at one price and cheap at another.” I would conclude that if Group's market valuation were to fall in the future considerably below approx. $7.5 Mil. then there may be an inherent margin of safety in its securities.










    Disclosure: No positions

    Disclosure: No positions

    Disclosure: No positions
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