Off course after listing

THERE might not be many of them, but stockbroking firms that have gone the route of a stock market listing have generally found the very public journey a painful one.

Each of Etrade Australia Ltd, Sanford Ltd, Euroz Limited, HP JDV Ltd and Tolhurst Noall Group Ltd has moved to public listing in the past few years, but their fortunes have been less then consistent.

Etrade posted a loss of $8.3 million in the December 2001 half, despite an 11.2 per cent increase in brokerage fees on customer assets of $2.2 billion – a 42 per cent increase.

Sanford Limited tells a similar story. In the year to June 30 its client base grew from 25,000 to 38,000, yet its share price has been shaky since it first listed in August 2000. The share price has fallen from $1.50 just after the technology stock fall out to be at 27 cents, after sinking as low as 16 cents following the September 11 terrorist attacks.

For Hartley Poynton-cum-HP JDV Ltd the story has been similar. Although having a market capitalisation of $61 million, it is now trading at all-time lows around 67 cents – well below prices of $2.70 reached during the technology boom.

Tolhurst Noall Group Ltd, with a market capitalisation of $16 million, has come back from a high point of 60 cents in March to be around 22 cents, although investors have had the benefit of a merger in July of Noall Group Limited with D&D Tolhurst Limited.

Euroz Limited, back-door listed by Treloar Group Ltd, formed out of Perth after a Patterson Ord Minnett senior staff walkout, is the only standout performer, according to DJ Carmichael analyst Peter Strachan. Euroz last week announced a pre-tax profit of $372,437 for the half year to December 31.

“It is a small, focused business that is making money,” Mr Strachan said,

“But at the end of the day, stockbroking firms are notorious for not giving returns to shareholders because most of the money goes to staff in the form of wages and bonuses. There is a strong argument that says stockbrokers shouldn’t be listed.

“As private concerns the shareholders are normally just senior management so it’s not an issue. Whether they get a bonus or dividend makes no difference.”

To turn the listed broker into profitable concerns, two options are available. Look for new revenue streams such as diversifying into fund managers or cut costs by outsourcing clearing and settlement services such as Etrade has done.

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