Pulse holds stock price in difficult market

Published: Wednesday October 15, 2008

Pulse Investments stock has been holding its value in a difficult stock market which has seen declines in the price of a number of blue chip stocks. Last week the Jamaica Stock Exchange (JSE) fell by a wopping 4,500 points!

Since trading just over a month ago at its lowest price in several months at J$5.00 per share, Pulse stock has rebounded, trading at J$5.60 a few weeks ago and has since held firm at J$6.00 in recent trading.

The earlier drop in price to J$5.00 coincided with the sale of 15 million units (approximately five per cent of the company) by the Development Bank of Jamaica at the beginning of September. Investor confidence in the company has remained steady and this might be partly attributable to the company's performance, as reflected in its audited results released at the end of August.

In financial year ended June 30, 2008, the company was able to increase its revenues by 72 per cent (up from J$789 million to J$1.357 billion) and its net income by 62 per cent (up from J$266 million to $430 million). Retained cash at the end of the year was J$62 million, a significant increase on the J$1.9 million retained at the end of the prior year. Overall debt (including preference stock liabilities) was lowered from J$54.5 million to J$28 million, almost a half of the 2007 figure.

Another reason for investor confidence, might be the fact that the company's stock is one of the best priced on the market, currently trading at less than four times earnings, which would make it one of the most attractive, if not the most attractive stock on the JSE, from an earnings to price ratio perspective. Assuming that the company continues to perform as it has over the last few months there would appear to be a clear prospect for growth in its stock price.

It seems that Pulse is uniquely positioned to do this, despite the current global challenges, given the nature of its business and the structure of its revenues. Pulse earns a significant part of its income from advertising entitlements, which is the non-cash fee paid for its TV programming by several of its broadcasters. With the rapid expansion in cable and non-terrestrial TV broadcasters around the world, a demand for Pulse programming remains high. Given that broadcasters, in most instances, have the option to pay in contra advertising, the sale of Pulse programming is not particularly difficult, especially in a cash challenged environment. Pulse then has the option of converting these assets into cash, by using them to market its other products or to enhance the attractiveness of its sponsorships to brands, which must advertise to survive.

With increased diversification and its low debt model, Pulse should continue to grow. With its attractive price to earnings ration, Pulse can be expected to gain new converts to the value of its stock, based on its business model and international potential over time.

Recently, Pulse took another step towards increasing investor confidence by placing a J$100-million insurance policy on the life of its Chairman and CEO Kingsley Cooper.
Tanya Powell of NCB Capital Markets speaking with the Business Observer yesterday said: "Pulse is an illiquid stock. It last traded on Friday and before that on September 22nd 2008 . However, when it trades it makes big movements. The stock continues to perform well this year and the stock price is holding up."

Alexander James of FirstGlobal added: "Pulse is a closely held stock and those holding it are not selling during this downturn. There are som offers for it but there are no sellers in the market.

"Persons holding Pulse are seeing the value remain constant and are not losing value like a lot of stock particularly the fianancials on the JSE. Since Pulse relisted, the company has cleaned-up its balance sheet, restructured and pursued a number of different revenue streams. You can see that it has been rewarded for its efforts by the price moving from J$2.30 last year when re-listed to J$6.00 today."


Source: Jamaica Observer
http://www.jamaicaobserver.com/magazines/Business/html/20081014T220000-0500_141316_OBS_PULSE_HOLDS_STOCK_PRICE_IN_DIFFICULT_MARKET.asp