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Research
Nucent Finance Ltd - "The only listed advertising agency in the country" - Nirmal Bang
Posted On : 2013-09-08 19:35:17( TIMEZONE : IST )
Nucent Finance is the only listed advertising agency in the country. The name of the company will get changed to Pressman Advertising Limited(Pressman) with effect from September 11, 2013.
Investment Rationale
One of the leading Indian advertising agencies: Founded in the mid-60s, Pressman is one of the reputed Indian advertising agencies in the country. The company has consistently posted profits come what may, reflecting the dedicated and conservative approach of the promoters, especially in a scenario where multi-national companies dominate 80% of the sector.
Promoted by veterans in the industry: The company is promoted by the brothers, Dr. Niren Suchanti and Mr. Navin Suchanti, who have nearly four decades of experience in this field.
Strong earnings visibility: The company has diverse stream of revenues with the business divided into four verticals: Advertising (70 per cent), Public Relations (20 per cent), Digital (8 per cent) and Design. With nearly 80 per cent of repeat business, the earnings visibility is very strong in an otherwise weak environment.
Debt-free, cash-surplus Balance Sheet: The Company has a clean Balance Sheet with net cash and cash equivalent totaling to ~Rs.10.7 crore, equivalent to one-third of the present market-cap.
Excellent dividend yield: The stock is cum-dividend of Re.0.8 per share. We expect a dividend of minimum Re.1 per share for FY'14, translating into 14 per cent tax-free returns over the next 14 months.
Valuation & Recommendation
The company posted revenues of Rs.43.3 crore during FY'13. The PAT for the year stood at Rs.6.28 crore, translating into an EPS of Rs.2.68. During Q1FY'14, the company clocked a PAT of Rs.2.01 crore on revenues of Rs.9.58 crore, translating into an EPS of Rs.0.86. We expect the company to post a PAT of Rs.7.5 crore on revenues of Rs.48 crore. This should translate into an EPS of Rs.3.19.
The cash and cash equivalent in the books adds up to more than Rs.4.55 per share. A clean balance sheet coupled with dedicated promoters and being the only listed advertising agency in the country, we value the same at 7x FY'14E earnings to arrive at a price target of Rs.22.5 per share over the next 9 to 12 months. This includes dividend of Rs.0.8 per share for 2012-13, for which record date is September 11, 2013.
