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News : National Last Updated: Dec 13th, 2016 - 22:26:17

Pulse plus
By Marston Gordon
Dec 13, 2016, 22:22

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The idiom “once bitten, twice shy” probably accounts for investors’ diffidence in acquiring shares in Pulse Investment Limited (PIL). This paper was adamantly against the relisting of the company by the Jamaica Stock Exchange (JSE) in 2006 after 5 years of being delisted for failure to file financial statements for several years.

For financial year 2012 PIL changed auditors from KPMG to BDO; it also significantly improved on the timeliness of filing its quarterly and annual reports with the JSE. In fact, the first quarter 2015 financials were filed ahead of the due date.

We have recommended PIL as a buy for five consecutive years since 2012 at the then price of $2.20 for a target of $7.00 per share.
A lot has changed in the ensuing years; in December 2015 PIL declared its first dividend in 21 years ($0.06 per share) and will consider a dividend of $0.08 at a meeting scheduled for December 20, 2016.

For fiscal 2016 PIL earned $1.35 per share ($0.74 -2015) and its net book value stood at $7.11 as against the current stock price of $3.90, in other words it is trading at a steep discount.

Income from the model segment for FY2016 is up 134% over the corresponding period last year.
The company is evolving into a real estate entity. Rental income now accounts for less than 15% of its revenue but this is set to jump to 45% on completion of guest rooms and suites at the Stony Hill property if the planned rights issue for 2017 is successful. PIL intends to raise $500M for the build out and forecast annual revenue arising there from of $195M per year, with most of if flowing to the bottom line. The payback could be well under 5 years.

It is understandable that investors are wary because the bulk of the revenue is derived from non-traditional sources: market sponsorship and advertising entitlements. The opacity of the fair value appreciation and leasehold revaluation does not help, but as the saying goes- “show me the money”. The cash flow statement does just that, operating cash FY 2016- $67.6M (FY 2015- 20.1M) and Q1’17- $27.5M (Q1’16- 16.2M).

Investors should take notice!
Source: Jamaica Gleaner, Jamaica Stock exchange

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