Oct 2008 Financial News

Pulse to list on Trinidad stock exchange in 2010. Expects Villa Ronai to earn J$1 billion a year

Oct 17, 2008

Pulse Investments expects to list on the Trinidad & Tobago Stock Exchange (TTSE) in 2010. The entertainment and real estate development company relisted on the Jamaica Stock Exchange back in 2006 and today is one of the best performing stock on that bourse. Pulse ended last year with a share price of J$2.30. Today it stands at J$6.00 after the company has cleaned-up its balance sheet, restruc-tured and reduced its debt burden.

At an investors briefing held at Knutsford Court Hotel on Wednesday, Chairman and CEO Kingsley Cooper announced that Pulse expects to earn up to $1 billion a year from converting Villa Ronai into a luxury spa within five years.

The move would add hospitality to the fashion company's core activities. But it is also looking to offer athlete management services.

The spa will offer 50 rooms with prices ranging from US$1,000 to US$2,000 a night.

"Our best case scenario in two years (after completion) is J$1 billion, and our worst case scenario is J$500 million," said Copper speaking at the investors briefing.

The worst case scenario would represent 35 per cent of this year's record J$1.35 billion in revenues. What is more is that over 88 per cent of Pulse's revenues are non-cash. The expected revenue streams from the spa would thus transform the cash focus of the business from fashion to hospitality, all things remaining equal.

"It will be three years before completion: Two years of construction and one year of outfitting and training of staff. It is a beautiful property and the experts say Villa Ronai could be the mecca of spas," said Cooper.

The property will cost between "J$300-J$500 million" to construct and outfit. Cooper will fund the project without debt. "There is equity coming from related parties and we may go back to the stockholders if necessary," he said. "We are committed to a low-debt model."

Cooper recently raised some J$126 million in a Rights Issue. Pulse was caught in a debt trap in the 90s when it borrowed and its loan interest shot up, chocking its cash flow. That led the company to restructure and delist from the stock exchange.

In June 2006, it was relisted and is currently one of the top performing stocks. Its year end net profit stood at $429.8 million, a 62 per cent increase over 2007.
Advertising entitlements

However, there is controversy surrounding its non-cash revenues. On Wednesday Cooper issued a two page FAQ sheet on this topic. Most of the non-cash revenues represent advertising entitlements and market sponsorship. Cooper focused on advertising entitlements, which are available ad slots during the broadcast of Pulse television productions.
Producers have two ways to earn money from broadcasting television shows. They can sell the shows directly to the broadcaster or split the advertising slots with the broadcaster. Pulse says it earns more by splitting the advertising slots with television stations.

"For example, a half-hour television show of similar quality to Pulse's product would sell to broadcasters in the Caribbean for somewhere between US$500 and US $1,000," said Cooper whilst outlining the benefits of splitting adverting slots.

"By splitting the six minutes of advertising (legally allowed in such a programme) between Pulse and the broadcaster, as is the usual agreement, Pulse ends up getting three minutes of ads (six 30 seconds ads) every time the show is broadcast or rebroadcast. Given the fact that some of these programmes are looped and rebroadcast several times on cable and at least twice on free to air TV and, given ad rates of anywhere between US $100 and US$500 per 30 second spot, Pulse earns between US$3,600 and US$6,000 per programme per broadcast. This is much more than the company wold have received in a cash sale," he said.

Pulse does not expect the financial downturn in the US economy, Europe and Jamaica to negatively affect its operations. Instead it foresees TV stations offering more entitlements instead of opting to buy shows.

"TV entitlements are perfect for us, TV stations will be happy to offer entitlements because of the downturn and cash shortage. If we manage this skilfully we can come out ahead," he said.

Cooper added that he was in talks with a local sporting entity to manage athletes. He said the Olympic success spurred this interest.


Source:
Steven Jackson
Jamaica Observer
Friday, October 17, 2008

http://www.jamaicaobserver.com/magazines/Business/html/20081017T020000-0500_141439_OBS_PULSE_TO_LIST_ON_TRINIDAD_STOCK_EXCHANGE_IN_____.asp