Despite the University of the West Indies looking to construct 826 additional residential units on its Mona Campus, 138 Student Living Jamaica Limited [JSE: 138SL] has requested for all plans to cease. This request was made based on the fact that there have been too many empty rooms on the new residential hall.
The rooms are said to be unoccupied because students are not able to afford them. Hall fee for single rooms is $51,350.00, and double rooms are for $29,770.00. On this hall, students enter the rooms using the elevators with entry cards. If hall fees are not paid, then the key cards are blocked, preventing students from entering.
Therefore, 138 Student Living is partnering with Sagicor Group Jamaica through an employment model, where students will be able to gain income to help pay the hall fees. 138 Student Living expects this employment opportunity to benefit about 5 percent of Jamaican students as they are hired to process excess work off-site for the companies involved. To assist students in this venture, Sagicor would upgrade internet speed for students for them to be more efficient.
Since the inception of 138 Student Living in 2014, the company has constructed 1800 rooms at UWI under two agreements, but because of the lack of occupancy, these ventures have been unprofitable. Therefore, the company aim to increase occupancy by 10% to improve profitability.
At the end of the September 2017 quarter, 138 Student Living reported a net profit of $51.7million, a 98 percent increase when compared to its previous quarter. While, the company experienced a 63 percent increase in expenses the overall financial performance was better than 2016, this stems from Gerald Lalor flats for which the company is building its brand.
Unfortunately, market sentiment need more convincing as no zero volumes were traded yesterday and the performance of the stock price has been lackluster.
Current price is JMD$6.15 with an extremely high P.E of 51.3x compared to the industry P.E of 31.0x.
While we would not recommend 138SL as a buy right now, we will be keeping an eye on it.
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