Pressman Advertising

Recently I found this stock and liked. Just want to share my views for your kind re-examination.

It is one of the oldest & largest Indian advertising agencies, and sole agency in listed space. The space is dominated by large multinationals. The business model is good, high margin, without much capital requirement and scalable.The financials of the company is good, not much debt, great dividend yield (5%). Management is good. Appears to be safe bet, and can pay handsomely if some Indian agency is able to establish itself globally.

Is this company connected with Pressman Leasing in any way? The name is very un-usual for two companies to share. What is the history of the company & the promoters?

Pressman Advertising is a very old Indian Advertising agency promoted by one Suchanti, who had a great reputation in advertising community. Now the company is run by his sons, all looks well qualified. Unlike other indian advertising agencies (Rediffusion, Chaitra etc.), they didnt merge themselves with multinationals and maintained separate existence. Lately they acquired a listed defunct construction company, merge themselves with that, and changed the name to their name. It happened in October 2013.The company is a very small company (40 crores revenue) but large for a business having big margins. Company is valued around 1 times sales, and 12 times earning. Negligible debt. Margin is good and ROE is excellent. Dividend yield is 5%, and dividend coverage is around 2.5 times.

My interest on the stock is for these reasons-

(1) My inherent bias for service sector, particularly in high margin businesses.

(2) The business is scalable without much capital infusion.

(3) ROE is likely to be high for incremental capital deployment.

(4) Economic recovery shall result in higher advertising spend.

(5) They are doing the right things in terms of moving towards digital advertising, financial communication, PR work etc. Their client list is good.

(6) The sector is largely unorganized at this point of time, and any organized company taking foothold in this sector can be rewarding.

… and finally the basic question- Is it possible that in a few years time, some Indian advertising agency can stand in comparision to US advertising agencies like Lintas, Leo Burnette… I dont know.

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Hi Rajesh,

Interesting stock idea. I was also surprised to see a small cap advertising co listed in the markets (NSE and BSE). A few questions that I had are below.

  1. Do we have any idea of the performance of Pressman Advertising before it took over Nucent Estates?

  2. Some of the erstwhile directors are still with the company. Will this be a deterrent?

  3. From the AR 2013 I can see that the real estate business has been discontinued, which provides some clarity. However, are there any liabilities or pending cases relating to Nucent Estates?

The valuation multiples appear to be attractive. Thanks for your detailed analysis and for presenting key points. I appreciate all your efforts. The questions above are just for me to get more clarity before investing in the stock.

Thanks Rajesh for unearthing this company and Sridhar for re-activating this thread. In this age of TMI, small-cap (micro?) companies have very little chance of coming to our attention let alone getting the effort required to be reviewed or researched considering the difficulty in obtaining information on such companies. Pressman Advertising intrigued me sufficiently (also considering my current outlook documented in VP elsewhere) to put in some effort to document them so that other seniors in the forum can help dissect the company to see if it is worth further research (and allocation).

Following is the information I found online on the publicly listed company and the original Pressman Advertising company:
1. Pressman Advertising was founded by H.C. Suchanti in mid-1960s in Kolkata
2. Pressman Consultants Ltd. was incorporated by the Suchanti family in 1983 undertaking equipment leasing business and later PVC manufacturing and was listed in 1985
3. The listed company seems to have diversified from leasing to mutual funds to merchant banking to corporate management services and settled as NuCent Finance till 2005
4. In 2005, NuCent Finance exited financial services business and changed to real estatebusiness as NuCent Estates to undertake "its maiden real estate venture at Siliguri in West Bengal". The family seems to have had some success in real estate as promoters of Sinclair Hotels (another listed company with same management which has Market Cap of ~150 crores now)
5. In 2012-2013, NuCent Estates company merged with their group firm Pressman Advertising, changed name and seems to have fully exited real estate and other unrelated businesses. The promoter's holding increased from 55.1% to 74.9%possibly because they owned 100% of Pressman Advertising. The minority shareholders seem to have got a good deal considering that NuCent Estates wasn't making much profit before the merger
6. Pressman Advertising's EBIT before merger (advertising business) was 6.7 crores in 2011-12. It looks like EBIT hasn't grown much in the last two years for Pressman's advertising business
7. From the perspective of listed firm financials, at the current TTM P/E of 7.5 and CMP Rs. 20, valuation seems reasonable for a business with NPM of 16% and RoCE of >30% (unsure of the correct way to calculate RoCE considering the merger in previous FY)
8. Pressman Advertising seem to be in a good mix of advertising segments including brand advertising, PR, financial communication and digital marketing solutions. "The business is focused on two major verticals, namely financial and government/PSU". ""In the âfinancialâ vertical, clients include leading names from sectors like banking, asset management, investment banking, leading corporates, etc. In the âgovernment/PSUâ domain, clients include several state and central government bodies as well as top-ranking public sector and state government undertakings"
9. Considering that this is a services business very dependent on the skills and capabilities, they seem to have only 100 employees across 11 Indian cities. Unsure of how they can scale even if they are capable to win additional business. Considering that the PSU business might grow at best at GDP rate, the only possible growth area is financial communication for private enterprises - no idea of how attractive and growing this space is?
10. They refer to as being a member of ECCO International Public Relations Ltd., a global network of independent PR agencies - it seems they pride on being independent and probably that is helpful to win public sector advertising - but will they be able to win business from large or new or growing Indian companies? They refer to being economical in advertising - does it mean they operate in the low-end of advertising and will not be able to raise prices - can they move up the value chain (if there is such a thing in this business?).
11. Key management personnel are 60+. No succession planning information
12. Dividend at Rs. 0.80 was probably attractive in 2013 when price was lower - at Rs. 20, the dividend at 4% isn't that attractive
I request others with more experienced in researching this kind of untested companies to spare sometime to validate and add perspective.
Full disclosure: I have NOT invested in this company. I will update this thread if I do invest.
Links:
http://www.pressmanindia.com/
http://www.pressmanadvertising.in/
http://en.wikipedia.org/wiki/Pressman_Advertising_Limited
http://www.pressmanadvertising.com/
http://www.pressmanfinancial.com/
http://www.pressmanfinancial.com/pdf/Pressman_Corporate_Brochure.pdf
http://www.pressmandigital.com/
2 Likes

Hi Satish,

Thanks for sharing a lot of valuable information on this small cap company. What gives me some confidence is the fact that the advertising company has existed since 1960’s. So its not a case of name change of some defunct company but a takeover of real estate co by the advertising co.

Secondly, as you pointed out the dependence on Govt./PSU clients could slow down the growth of business and profit margins. However, when I check the client list athttp://www.pressmanadvertising.com/clients.php I find a lot of listed companies too. For example we have Bata India, Godrej Ind, CRISIL, Tata Steel, Whirlpool, etc. The list of clients seems to be impressive. It look as if they are diversifying across private sector clients across different industries, which is a positive factor. If we can get information of the top 10 or 20 clients and its composition in the revenue it would help us understand if they are over-dependent on some clients/segments.

Pressman Advertising’s client list you shared Sridhar does seem impressive but I am not sure if these private enterprises are clients of Pressman’s Corporate, Brand/Product advertising OR clients of their financial communication business (which doesn’t sound that lucrative). The sample work listed on the website for Adani, Glaxo, etc., are all from 2010.

Hopefully there will be additional information on their top advertising clients in the 2014 annual report when it is published.

Interesting point. I frankly don’t know which segment these clients fall under. You made a valid observation. Since I’ve recently started looking at this company I dont know much about its history or track record. Lets hope the annual report 2014 comes out soon and provides more clarity. Thanks for the insights.

The results of Pressman Advertising was announced on Aug 12th. The revenues at Rs.8.77 crore was quite disappointing given that corresponding figures in June 2013 quarter were Rs.9.58 crores. In the last 3 quarters including June 2014 the revenues have been showing a declining trend.

The Net profit was Rs.1.25 crore against Rs.2 crore in June 2013. If I look at the trend the results don’t appear good. Given that its a small company some volatility in financial performance is expected, but a declining trend is worrisome. The good point is their ability to maintain decent margins so far.

I also like to invite views from other participants and seniors in the forum. How does the future potential look after review of the last few quarters?

I request view of participants on Pressman Advertising. Is the annual report released?

Disclosure: I have invested in this stock.

Looks great at the first look. Where has this been hidden. Deserves detailed study!

The annual report for fy 14 has been released. You can find it on bse or cos website. I didn’t go through in detail but last years performance seems to be better than current year nos. Please share your views on this.

Looks like an interesting stock. Is there any way to find previous year annual reports for Pressman? I was able to find annual reports for Nucent but they are not useful as the business was different then. It would be good to understand how has the advertising business done in the past during good times

The business looks interesting at the first glance given high ROE and clean balance sheet. Few questions that we need more clarity on :

1). What is the reason for the company to not focus on other sectors apart from Financial services and Govt?

2). Going through sample work of the company it seems that they are more strong on the print advertising space, why doesn’t the company focus on TV media

3). What sort of pricing power would the company have in its financial advertising and advertising engagements with PSU/Govt -very low in my view

4). What is the source of growth for the company going forward? As mentioned above sales have been declining, what’s the reason for the same (Fin services and govt in doldrums?)

5). How do they differentiate from the more popular peers when they pitch to clients? Is it on costs/understanding of the space,TG etc?

6). Client concentration from top 10 and also from sectors

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Just some anecdotal evidence against the company - my wife has been in advertising throughout her career - so I asked her about Pressman and its output. She said its a fudgy-dudgy agency, producing mediocre work, and is playing the price game. Hence the PSU work. Also the lack of recognition and awards somewhat agrees with that.

No doubt the stock is cheap - but with the above, I think it merely reflects a mediocre company, and not value. Skip for me.

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An interesting point to think about is, the good years that MF and capital markets are expected to see over the next few years which will lead to many MF scheme ads and IPO offer ads which will benefit Pressman as they seem to have a strong hold in this sector. Has anyone tried to reach out to the management, we can pool in our set of questions and maybe talk to the company… couple of things we can try and understand :

1). Growth levers

2). Reasons for recent under-performance, especially in the last quarter, given things in the financial services industry (MFs etc) are turning around.

Hi Guys,

I spoke to the analyst covering the stock and also had a very brief chat with Mr Pasari (who is VP Finance @ Pressman). Sharing my information here:

  • Pressman did a reverse merger as their other company Nucent Finance was not delivering any returns for the shareholders (10 Rs stock was languishing @ INR 2/3). So this was there way to compensate shareholders. I need to still check the details at which the reverse merger happened. But the analyst mentioned that, one of the key reasons for reverse merger was to reward shareholders in Nucent Finance.
  • Pressman does work for three kinds of clients - a) Financial services players b) PSU companies c) Govt
  • They had a contract with the erstwhile Delhi Govt where they did PR work for Shiela Dikshit’s govt and that was a good part of their revenue (10-15%). Their recent underperformance is also because of that as there is no revenue from that since the last 2-3 quarters
  • Mr Pasari was not willing to share the split between Financial services and PSU/Govt, all he mentioned was that it keeps varying
  • He mentioned they will be benefited if the economic cycle revives. But he was not willing to talk for more than 5-10 minutes on phone. Overall didn’t look very shareholder friendly

If anyone is in Kolkata here, then maybe they can attend the AGM and ask the questions. We can collate the questions here… views invited.

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Good questions and points. Would the company expand to private sector and mnc clients. Can someone elaborate on this.

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Hi Friends,

The results of Pressman Advertising are out. Although the result look good compared to previous quarter, the YoY comparison shows that its a bit stagnant.

Income was Rs.10.74 crore and net profit was Rs.1.78 crore during the quarter. This looks poor compared to Sep 2013 quarter when sales were Rs.10.14 crore with profits of Rs.2 crore.

If we look at the half year ended Sep 2014 the sales was Rs.19.51 crore with profits of Rs.3 crore, while Sep 2013 show sales of Rs.19.73 crore with profits of Rs.4 crore (approx.). The overall growth compared to past figures has not been good. The only good part is the net profit margins which have been in the range of 15-20% (roughly), which feel is good.

Can someone with knowledge/experience in advertising confirm if 15-20% net profit margin is good or comparable to industry standards? I’m not sure of this.

The other interesting aspect I observed is that their clientele in private sector is increasing gradually though they may never reach the level of O&M, Lintas and other big names. There is good demand from financial services firms, private companies, etc. Some companies that are planning to go for IPOs or those requiring public relations services seem to be working with Pressman. I found this on their list of clients and from press-releases - so please do your own due diligence.

The volatility in performance is understandable given that its a small cap company. Although its not a typical start-up its small-size would mean dependence on certain projects, clients, etc. Last year (FY 14) they have done a revenue of Rs.38 crore. This first half of FY 15 they have done Rs.19.5 crore. Lets hope they cross previous year’s sales by a good margin. The profit growth is not good, which is understandable for a small co., but their margins have been stable and decent enough to sustain operations for a longer time. From the results I find the returns on equity to be around 25%, which looks good.

As Rohit mentioned its not a known name in advertising industry. Moreover, their style of functioning may be a bit old fashioned. Although they may not be great advertising guys with crores of billings they still have their niche and are building client base.

As expected no fund or institution has picked up stakes, and neither is the stock covered by research houses or brokerages. So its not popular as such. Moreover, there is not much of value unlocking or a big trigger now (since the change of name of the company).

I invite senior and other value pickers to share their comments or feedback about my points. It would be helpful or valuable for me and others who are tracking this company.

**Disclosure: **I have invested in this stock. The above points may not be accurate so do your own due diligence.

Small Correction: Nirmal Bang had started covering the stock in Sep 2013, but I couldn’t find any other reports as far as I know. If someone finds a report or coverage please share the link.

Thanks,

Sridhar

Any updates about the company or recent developments? Pls share if any