Home' Trinidad and Tobago Guardian : April 6th 2017 Contents APRIL 6 • 2017 guardian.co.tt BUSINESS GUARDIAN
STOCKS | BG17
Sigma Fund boosts
Sagicor X Fund's 2016 results
Including Sagicor Group Jamaica Ltd's
21.11 per cent ownership (473.4 mil-
lion shares) and its subsidiary, Sag-
icor Real Estate Fund's 8.2 per cent
stake (183.9 million shares), all other
Sagicor related entities owned almost
85 per cent of the Sagicor Real Estate X Fund
Ltd (X Fund).
This fund, which is registered in St Lucia,
continued with its expansion into hotel and
real estate investments, although not with
We will now review the X Fund's results for
the year ended December 31, 2016.
Changes in financial position
Total assets advanced by 31 per cent to
J$44.36 billion from J$33.86 billion.
The greatest change was shown under long-
term assets, which climbed to J$41.9 billion
from J$30.2 billion. The property, plant and
equipment component rose to J$25.1 billion
from J$19.4 billion, which included a revalu-
ation adjustment on its two hotel properties
of J$3.25 billion.
The investment in Sigma Global Fund---real
estate portfolio climbed by 43.7 per cent to
J$15.41 billion from J$10.73 billion. Net addi-
tional purchases of J$2.58 billion along with
appreciation in the value of its holdings of J$2.1
billion were the main contributors to this gain.
During 2016, the fund acquired a 15 per cent
interest in real property, named Palmyra, which
is undergoing renovation; this is shown as in-
vestment property of J$1.17 billion. For 2016, its
share of expenses was J$16.79 million. Starting
in 2017, the fund expects income to flow from
Financial investments increased from J$105.7
million to J$221.5 million; this mainly repre-
sented its holdings of Government of Jamaica
Current assets declined to J$2.47 billion
from J$3.63 billion. The major movement was
shown under cash resources, which contracted
to J$1.27 billion from J$2.4 billion.
The receivables element rose to J$825.5 mil-
lion from J$699 million. Both trade receivables
and prepayment declined; the former closed
at J$354.2 million from J$448.3 million while
the latter ended at J$142.3 million from J$186.9
In contrast, sums due from related parties
swelled to J$261.8 million from J$20.4 mil-
lion; the bulk of this figure mostly represented
J$249.2 million due from Sigma Global Funds
real estate portfolio.
Total liabilities increased to J$24.5 billion
from J$18.2 billion. The borrowings compo-
nent climbed to J$21.65 billion from J$17.07
billion, however, the current portion fell to
J$2.72 billion from J$5.42 billion. The long-
term element advanced from J$11.65 billion to
J$18.93 billion. This increase was concentrated
under the mortgage notes category, which rose
to J$15.8 billion from J$11.7 billion.
Notably, the portion of total borrowing that
is due to related parties climbed from J$5.6
billion to J$10.6 billion and now represents 49
per cent of the total.
(Is this concentration a cause for concern?)
Although the US dollar portion of total debt
increased to J$13.9 billion, that sum represent-
ed 64 per cent of the total of J$21.65 billion; in
2015, US dollar debt of J$13.03 billion was 76
per cent of that year's total of J$17.07 billion.
Payables increased to J$1.7 billion from
J$954.3 million; four out of five components
rose. Accruals swelled to J$711.5 million from
J$338.2 million while advance deposits closed
at J$444.4 million from J$243.7 million. Trade
payables jumped to J$332.4 million from
J$199.8 million while sums due to related par-
ties (Jewel Hotels and Sigma Funds) climbed
to J$131.1 million from less than J$1 million.
Shareholders' equity rose to J$19.9 billion
from J$15.65 billion.
Retained earnings ended at J$4.3 billion from
J$2.9 billion. The brought forward balance was
boosted by net profits of J$1.7 billion, but then
dividends of J$314 million reduced the closing
The fair value reserve closed at J$2.56 billion
from zero. This reflected the net unrealised
gain on revaluation of property, plant and
The currency translation reserve advanced
to J$402.7 million from J$82.7 million; this in-
crease represented the re-translation of foreign
operations (mostly, Hilton Doubletree Univer-
sal hotel in Miami).
Share capital was unchanged at J$12.64 bil-
lion for both periods.
Having 2,243,005,125 shares outstanding,
each share had a book value of J$8.87 (2015:
Revenues and profit
Total revenues rose by 55.1 per cent to J$10.25
billion from J$6.61 billion.
The largest income stream, hotel revenues,
advanced by 51.8 per cent to J$8.5 billion from
J$5.6 billion. The two largest components were
rooms, which increased to J$6.9 billion from
J$4.8 billion and food and beverage, which
climbed to J$1.02 billion from J$373.3 million.
These strong increases largely reflected the full
year's operations of the Hilton Doubletree,
which was bought in late 2015.
Net capital gains on financial assets and
liabilities improved to J$1.77 billion from
J$1.02 billion. Both realised (J$150 million)
and unrealised (J$2.1 billion) capital gains on
the Sigma real estate portfolio added a total of
J$2.25 billion. Thereafter, net foreign exchange
losses of J$403.5 million and net capital losses
on loans payable (J$84.7 million) restrained
the overall increase.
Net investment income rose to J$25.5 mil-
lion from J$19.4 million. Total interest income
from deposits, securities and financial assets
improved to J$42.3 million from J$19.4 million;
thereafter, investment property expenses of
J$16.8 million (Palmyra purchase) reduced the
Total operating expenses rose from J$4.38
billion to J$7.03 billion. Consistent with the
addition of a new hotel, both direct and admin-
istrative and other expenses increased. Under
direct expenses, the most prominent compo-
nents were food and beverage and staff costs;
the former rose to J$1.1 billion from J$0.87 bil-
lion while the latter climbed to J$1.51 billion
from J$0.83 billion.
Under administrative and other expenses,
four items stand out. Staff costs closed at
J$898.6 million from J$523.7 million while
utilities rose to J$537 million from J$462 mil-
lion. Reflecting a larger long-term investment,
depreciation moved to J$491.3 million from
J$270 million. Finally, advertising advanced
to J$321.7 million from J$145.2 million.
Consistent with its higher debt, finance costs
rose to J$1.29 billion from J$764 million. These
changes resulted in a pre-tax profit of J$1.93
billion compared with J$1.47 billion for 2015.
The effective tax rate increased to 12.4 per
cent from 11.4 per cent. Consequently, the tax
bill rose from J$167.8 million to J$239 million.
Entities that were taxed at 1 per cent con-
tributed J$13.1 million while those that were
taxed at 25 per cent accounted for J$170.2
million and entities that were taxed at 34 per
cent contributed J$24.6 million. The remain-
der of J$31.1 million comprised other charges
and allowances. This indicates that the latest
hotel acquisition in Florida (Hilton Doubletree
Universal), where the tax rate is 34 per cent,
is not yet as profitable as the Jamaican-based
Hilton Rose Hall.
The after-tax profit came in at J$1.69 billion
versus J$1.3 billion for 2015.
The rights issue in September 2015 saw the
number of outstanding shares increase to 2.243
billion from 1.495 billion. Using the weighted
average number of shares outstanding for each
period (2015: 1.73 billion; 2016: 2.24 billion),
the EPS came at J$0.75 for both 2015 and 2016.
The Sigma real estate portfolio benefitted
from additional investment and improved re-
turns. The X Funds ownership percentage in
Sigma fell to 48 per cent from 50 per cent as at
mid-year 2016. This portfolio is also exposed
to the hotel sector as it has significant holdings
in three Jewel Resorts branded hotel properties.
The hotel operations enjoyed a full year
earnings from the new Florida-based Hilton
DoubleTree Universal. Profits, however, did
not measure up to the 2015 result.
In part, this is because the Florida property
is still in the process of being upgraded. There
is an unspent balance of J$851.2 million that
is earmarked for this exercise; if most of this
renovation is completed during 2017, then this
property should contribute more meaningfully
to the X Fund's current earnings.
Revenues earned outside of Jamaica expand-
ed from J$985 million in 2015 to J$3.5 billion
in 2016; this increase reflected the full year's
operations of the Florida hotel. As this revenue
stream improves, it will also become easier to
service the US dollar denominated debt.
Both the X Fund and Sigma continue to scout
for viable investments in tourism and commer-
cial real estate. A new St Lucian company, Sun
Isles Tour Services Ltd, was registered on April
20, 2016, but is not yet operational.
Share price and dividends
The X Fund's share price closed on December
30, 2015 at J$11.00. During 2016, it traded as
high as J$12.00 on February 9 and as low as
J$9.50 on August 24 and then closed at J$12.25
on December 30 2016. In 2017, it closed as low
as J$9.51 on January 26 and recently traded
In June 2015, the Fund paid a dividend of
J$0.16. In July 2016, the dividend was reduced
to J$0.14 on the enlarged share capital.
At the recent price of J$10.29 the yield is 1.36
per cent. That price also reflects a P/E multiple
of 13.72 and a price to book multiple of 1.16.
Sometime after the first quarter's results are
released in early May, the X Fund is expected to
announce a dividend payment for 2017.
In the next article, we will review Sagicor Group
Jamaica Ltd's 2016 results.
rose by 55.1 per
cent to J$10.25
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