Cable Bahamas has announced a share buyback plan that will see the company repurchase up to 200,000 shares on the Bahamas International Securities Exchange (BISX), a move that is likely to be intended to send signals that the company believes its stock is undervalued.
The formal share buyback, a first for the Bahamian capital markets, will see Cable Bahamas repurchase its shares “at prices to be determined” by its Board of Directors “from time to time”. The buyback can start when trading opens on BISX this morning.
“Management has been authorised to determine when the plan should commence, and may at its discretion terminate the plan at any time,” Cable Bahamas said in a statement.
Capital markets analysts suggested that Cable Bahamas’ move may be designed to indicate to the market that the company believes its share price on BISX undervalues the company.
The firm’s confidence in its own performance and potential share price appreciation should further boost investor faith in Cable Bahamas, while the buyback is also another way – apart from dividends – for the company to return cash and profits to shareholders. One source said: “It’s a good move for them. It signals to the market that the price should be much higher; that there is more upside in the stock.
Shares
The amount of shares involved in the share buyback is relatively small, given that the company has 20 million outstanding and issued ordinary shares, yet still significant when measured against BISX trading volumes.
Cable Bahamas’ shares closed at $9 on BISX at the end of Friday trading, following a fiscal 2005 during which it generated $11.3 million in net income, based on $57 million in revenues and a $26.7 million operating profit before write-offs.
Writing in the company’s 2005 annual report, Brendan Paddick; Cable Bahamas’ chairman and chief executive, said that had it not been for the one-time $2.36 million write-off for analogue set-top boxes; the company would have generated $0.69 in earnings per share during 2005, as opposed to $0.57. The former figure, Mr Paddick added, would have represented a 21 per cent increase over 2004. He said the company’s operating margin for fiscal 2005 was 46.8 per cent.
Mr Paddick said average revenue per residential customer had risen to $73.68 in 2005, compared to $45.20 in 2000, with overall subscriber numbers up by 37 per cent over that period.
He told Cable Bahamas shareholders: “By continuing to launch new and enhanced products, we believe we have the potential to achieve double digit revenue and operating cash flow growth for years to come, without significant reinvestment in our core network infrastructure.
“We plan to employ this cash flow in two primary ways: reinvesting in our business to drive future growth and returning capital to our shareholders.”
Mr Paddick said Cable Bahamas had invested $24 million in capital expenditure in 2005, including $4 million in building its Oceans Digital TV platform. A further $7 million was invested in network extensions, a $1.5 million capacity upgrade and $3 million in “broadening our market presence in the Bahamian telecom sector”.
Generated Cable Bahamas’ Coralwave Internet business generated $16.2 million in revenue during 2005, a 27 per cent increase over 2004. Describing it as the “premier” Internet service in the Bahamas, Mr Paddick said subscriber numbers had risen by 22 per cent in 2005, growing from 24,474 to 29,902. Monthly-recurring revenue from the Internet business rose to $1.5 million at year-end, compared to $1.2 million at year-end 2004, a 25 per cent rise representing an extra $3.6 million in revenue.
The data services provided by Cable Bahamas’ two affiliates, Caribbean Crossings and Maxil Communications, saw revenues grow by 25 per cent in 2005, from $5.7 million to $7.1 million, in “a break out year”.
By NEIL HARTNELL Tribune Business Editor
