Golden Prospect
03/23/2006
 Golden Prospect (GOL) was once primarily an investment trust with a heavy bias to gold, but has been transformed in the past year. While retaining a strategic and actively managed portfolio of natural resource companies, the group has successfully expanded into investment banking, with added interests in on-line publishing and soon funds management. As such, we believe the company is ideally positioned to benefit from the on-going resources bull market.
Golden Prospect's full year results announced last week built on the impressive start made earlier in 2005. Continuing to capitalise on the robust natural resource sector, revenue more than tripled from £10.1 million to £32.5 million. Not surprisingly gross profits rose 181 percent to £13.6 million. Gains realised on strategic investments totalled £7.1 million, and are still the primary driver of earnings. The actively managed portfolio added another £3.5 million.
We are particularly impressed with Ambrian Partners (AP), the investment bank that contributed £3.0 million to earnings. This was accomplished on the back of AP's involvement in 16 equity offerings. In 2006 we expect earnings growth at the bank to be underpinned by an increased service range. These added capabilities will allow AP to provide a more comprehensive service, improving client retention and raising additional revenue.
Further gains will be provided by the newly established Ambrian Asset Management (AAM) business. Having recently received approval from the Financial Services Authority, AAM plans to launch an investment fund focussing on the resource sector.
In our opinion the global commodity market will remain robust in 2006. Strong global growth, especially in places such as China and India, will continue to support demand for natural resources. Supplies in the meantime are likely to remain tight for years as it takes time for current investments in exploration to result in new discoveries. In our view, all aspects of Golden Prospect's business model should benefit from these conditions.
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