Why Is The Market So Bullish On Pulse Investments And Blue Power? – Small Trades Giving Big Price Movements!
Over the last four (4) months those of you who are avid viewers of the JSE daily stock price movements would have noticed dramatic movements in the stock prices for Blue Power and Pulse Investments. Under normal conditions and for companies much larger and profitable these would not have attracted much attention.
This is the essence of what we have observed so far based on Jamaica Stock Exchange information.
Blue Power Group Limited Price History
Blue Power started 2017 trading at $29.00 making steady upward movements.
On the 27th February Blue Power traded 221 units to push the stock price up $4.50 to close at $55.00.
On the 14th March 7,344 units traded which saw the stock losing $7.36 to close at $28.50.
Blue Power has been trading at a 52 week range of $11.00 to $57.60
Over the last five or so months trading volumes have been on the low side however on the 7th February 894,181 units traded at a price of 50.01. What does this investor know about the future prospects of this company that would convince him to trade this block of shares at this high price?
Pulse Investments Limited Price History
Pulse Investments started the year at JA$3.56 and from that date there has been a gradual and steady increase in the stock price peaking on the 13th March 2017 at $9.64 on trading volumes of 5000 units.
Pulse Investments 52 week range is: $2.25 to $10.00.
So far trading volumes have been relatively small, however on the 15th February 410,470 units traded at a price of 6.50 and 543,712 units at 6.51 on the 10th February suggesting that major stock holders were able to offload a good chunk of stock at a significant profit, assuming they had acquired the stock at or around the $3.56 price.
However not seeing any significant company action or decision that would lend itself to massive jumps in share prices coupled with the relative small trade volumes, the movements attracted our attention.
We sought the view and insight from some of the region’s leading financial analyst on the possible reasons for the upward tick in the prices of these stocks.
Noted financial analyst and active player in the stock market, Sushil Jain indicated that share price movements generally are primarily based on current and projected profits and investors’ perception of the growth prospects of the companies.
In the case of Blue Power, Jain indicated that published results of the first quarter ending 31st January, 2017 showed a 40% increase year over year. The Earnings Per Share (EPS) for first quarter he said was $0.63 which was 40% more than the year before. This he said indicates that the company can have an EPS of $2.50 for the year. Hence the investors are optimistic.
John Jackson another noted and avid player in the stock market, in an article published on his ICInsider.com website back in Dec 2016 had a price target of $45 for Blue Power. What was his thinking for this we asked? “Increased profits and a PE of 20 or there about, that was based on 2016/17 EPS and probably a PE 0f 15”, he offered.
As for the current bull market run on the Blue Power stock price, Jackson suggested that the overall market is trading at a forward PE of around 13 times 2017 earnings with some stocks around 16/17.
According to Jackson Blue Power seems ripe for a stock split with its limited supply of stocks being offered and profit performance is very good with expected growth.
Jackson is also projecting an EPS of $2.80 for the year to April and $4 for 2018. That is room for a lot of upside with a PE of 20 in sight. Lack of adequate supply is helping to fuel the move in the price aided by the good results.
Commenting on Pulse, Jain indicated that published results for the six months ending 31st December 2016 showed an EPS of $0.56 which means investors can project them to make an EPS of 1.00 for the year. They also provided some information about their planned property developments which gives hope for the future profitability of the company.
John Jackson for his part indicated that Pulse could be considered cheap based on the results and the disclosure of changes to its leasehold property, business expansion and increased cash inflows all helping to push the stock price upwards.
Some investors may well speculate that with a rights issue overdue there may be other forces at play. I can’t speak to that but selling has abated here he said.
It’s interesting to note that in November 2016 ICINSIDER.COM reported that “The latter (PULSE) just released the September quarterly report with the best quality of earnings in years, with an improving cash flow compared with prior periods and increased earnings of 32 cents per share. Excluding fair value gains on real estate holdings, earnings per share would be around 23 cents or 90 cents per share annualised. The stock price has room for growth in the coming months. This is clear indication that Jackson saw the price movement coming, or did he?
Jackson has also been very critical of the Pulse board, writing in a May 2016 article he said “Pulse Investments needs an infusion at the directorship level as they have telegraphed time and again that they have a board that lacks knowledge to effectively guide the company and protect investors. This was made clear when directors responded to questions from minority shareholders and how badly they handled the proposed rights issue.”
Not sure though if I’m convinced that the movements are what the analyst suggest are the reasons for them particularly when the price of Blue Power has gone now gone down to $29 and seems to be heading further in this direction.
Jackson thinks it’s ripe for a stock split with its limited supply of stocks and profit performance is very good with expected growth. Jain thinks the company can have an EPS of $2.50 for the year and investors should be optimistic.
Pulse so far seems to be holding firm at $9. Jackson thinks Pulse for some investors may be seen as unvalued relative to the rest of the market based on the results and the disclosure of changes to its leasehold property, business expansion and increased cash inflows all helping to push the stock price upwards. Jain says for the six months ending 31st December 2016 Pulse showed an EPS of $0.56 which means investors can project an EPS of 1.00 for the 2017.
What do you think? BM
Aldo (Al) Antonio is the Group Chief Marketing & Business Development Officer for the Blackslate Holdings Group Limited a private equity firm that primarily makes investments in the private equity of operating companies through a variety of loosely affiliated investment strategies including leveraged buyout, venture capital and growth capital.
Aldo Antonio and Blackslate Holdings Group Limited are currently not holders of stocks in Pulse Investments and Blue Power.