After enduring more than two years of COVID-19, which sunk occupancy from 99 per cent to less than 40 per cent, 138 Student Living Limited (138SL) is seeing a return to normal as The University of the West Indies (UWI), Mona, reopened the campus for face-to-face modality during the fourth quarter.

138SL had an average occupancy of 50 per cent for most of the financial year which moved to an average of 90 per cent during the fourth quarter (July to September). With an average five per cent increase in long-term rental rates, its revenue increased 68 per cent to $301.27 million with the unaudited financial year coming in 46 per cent higher at $1.19 billion.

138SL also benefited from short-term rentals during the fourth quarter which saw them host more than 15 groups and earn $39 million in revenue.

“Our expectation is that this trend will continue as students seek for quality accommodation in a secured environment. As applications for student long-term accommodations are still being received, we expect to be at full capacity for the second semester beginning January 2023,” said the 138SL quarterly report signed by Chairman Ian Parsard.

The company and its subsidiary, 138SL Restoration Limited, operate 1,464 rooms across four locations at UWI consisting of 1,692 beds. This is done under a 65-year concession agreement with UWI from November 2014 which also provides the company with a minimum occupancy of 90 per cent. Any variance below the minimum threshold is charged to UWI, Mona.

At the end of the 2021 financial year, UWI owed 94 per cent of the $1.40 billion in consolidated gross receivables for 138SL. This was attributed to the concession agreement which allowed the group to book revenue due to occupancy being below 90 per cent but record the remaining unpaid balances as receivables. Receivables less expected credit loss provisions declined 29 per cent from $1.28 billion to $903.29 million for the 2022 financial year.

This was due to arrangements arrived with UWI to settle outstanding balances and student receivables being significantly lower as they continue to enforce strict collection measures. When asked about a timeline for UWI to reduce the receivables balance, Parsard, “While no specific timeline arrangement is in place at this juncture, The UWI has indicated that they will continue to honour their obligations with their partners, including 138SL.”

138SL’s fortunes turned around in the fourth quarter as its net loss of $55.26 million moved into a $126.26 million net profit. For the overall 2022 financial year, net profit increased by 49 per cent to $364.92 million with earnings per share of $0.88.

Total assets declined by three per cent to $9.85 billion as its current asset base declined 18 per cent to $1.10 billion. However, the cash and cash equivalents spiked $38.94 million to $170.44 million with short-term deposits null. Total liabilities decreased 10 per cent to $5.16 billion as its non-current long term loan balance shrunk from $4.21 billion to $3.85 billion. Shareholders equity increased six per cent to $4.69 billion with book value at $11.31.

When asked about the consideration of its rebuilding its short-term deposits and potential dividends to ordinary shareholders in the future, Parsard said, “138SL is committed to meeting its obligations with all stakeholders, and this includes rebuilding the short-term deposits for debt servicing reserves.”

The short-term deposit balance was $216.07 million at the start of COVID-19 and supported the company in paying its interest expense. Its $210 million short-term to Sagicor Bank was extended from June to October 2023.

The group’s finance expense rose by 50 per cent to $363.49 million as interest rates increased from an average of five to eight per cent due to the rise in the Bank of Jamaica (BOJ) Weighted Average Treasury Bill Yield (WATBY) yields. The BOJ WATBY yield rose from an average of 1.66 per cent to 7.96 per cent over its financial year. Most of its long-term debt is variable rate and is reset every six months at the 180-day WATBY plus 350 basis points (3.50 per cent).

138SL’s stock price is up 18 per cent year to date at $5.11 which gives it a market capitalisation of $2.12 billion. Significant volumes just below the top 10 shareholders was traded on November 7 and 11.

“The outlook is very positive as the business model of 138SL is on a path of full recovery post-COVID-19. The board is critically examining strategic issues of the company’s capital structure and implementing various policies as contained in its original prospectus, including dividends,” Parsard closed.