Pulse mulls share issue
Pulse Investments is considering raising capital through the issue of new shares to investors.
Existing shareholders will vote on increasing the model agency and entertainment company's authorised share capital by 113 million, or by one-third, at the annual general meeting set for January 26, but the resolution is all but passed given that the chairman owns over 75 per cent of the stock.
Kingsley Cooper told the Financial Gleaner that he could not speak to specifics at this point "because of matters that have to go to court and to shareholders.
"The additional shares could allow for the issue of shares in the future" was all the Pulse chairman would say. Cooper was formerly executive chairman, but gave up the job of CEO to his daughter Safia Cooper on January 1.
Currently, the company has more than 271 million shares in issue. Should the share capital be increased to 450 million, Pulse will have room to issue an additional 179 million shares. At the current trading price on the Jamaica Stock Exchange (JSE), those shares could raise $510 million. Using the average share price over the last six months, they would bring in closer to $210 million.
However, the share issue might be a hard sell to investors given the performance of the stock since Pulse's rights issue in 2008. Then, when the company raised $127 million from a one-in-14 rights offer, the price was $7. It peaked at $8 within weeks, but fell dramatically over the years, bottoming out at 30 cents in 2014.
The share price has been rising steadily since mid-2015, reaching a high of $3.67 last November. It closed at $2.85 a share on Wednesday.
The proceeds from the 2008 rights issue were used to fund the acquisition of property into which Pulse has pumped more than $300 million to develop. This includes the Villa Ronai property in Stony Hill, which now features restaurants, a spa and boutique stores, among other things. Pulse's property on Trafalgar Road in New Kingston also houses shops and an entertainment venue called Puls8.
The focus on real estate investment has also meant that the company has been tight on cash and working capital. Its current assets have largely been defined by advertising entitlements, without which its working capital would have been in deficit from 2009 to 2013.
The modelling agency and entertainment company managed to achieve working capital surplus (outside of its ad entitlements) in 2014, and it has been growing since - it stood at $34 million as at September 30, not accounting for the $356 million it had in ad entitlements.
On the other hand, the company has been accruing debt owed to another of its chairman's companies - Samurai Investment - since 2013. The related-party liability stood at $59 million at the end of last September.
This month, Pulse has plans to make its first dividend payment in more than two decades. The total payout will amount to $16.3 million.
Having completed its latest real estate project, 9,000 square feet of function space at its Villa Ronai Spa and Suites, Cooper said income from these ventures will feed into future dividend payments.
"The real estate now means that, consistent with our strategy going forward, we will have more cash income coming into the business," he said last month. "We are also seeing an increase in the function business, so that expansion of the cash revenues is going to augur well for future dividend payments."
Pulse is also moving ahead with its next big project - a set of town houses and suites on a section of the nine-acre property. The town houses and suites won't be rolled out on a set timeline, but will be tackled as capital becomes available, the company said.