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Sagicor X Fund targets business process outsourcing sector with $1.15b investment

Published:Friday | February 6, 2015 | 12:00 AM
File Rohan Miller, CEO of Sagicor Real Estate X Fund.

Sagicor Real Estate X Fund Limited plans to develop a 50,000-square-foot facility in Montego Bay for rental as a business process outsourcing centre.

The estimated US$10-million ($1.15 billion) development will start sometime this year, said Sagicor X Fund CEO Rohan Miller on Tuesday, but he adds that the company has not yet acquired the land for the project.

It will be Sagicor X Fund's first venture into the BPO segment. The company is already working with Jampro, the Government's invest-ment promotion agency, to identify a suitable client for the facility in western Jamaica, Miller said.

The project aligns with X Fund's target sectors which, Miller said in January at the JSE Capital Markets Conference, would also include light industrial and tourism investments.

However, he said, it was expected that tourism, a foreign exchange earner, which at December 2014 contributed 66 per cent of X Fund's earnings, would continue to deliver the best bang for the buck for the company.

Sagicor X Fund listed on the Jamaica Stock Exchange in November 2013 at $5 per share. It is among the top 10 largest companies by market capitalisation on the JSE Main Market.

The stock now trades at $6.85 per share, valuing the company at $10.2 billion, but has traded as high as $7.28 per share in the past year.


Tourism vs Bpo


Miller says BPO space costs about $8,000 per worker to develop compared to tourism's unit price of $100,000, but he added that tourism as an investment category carried less risk, provided greater barriers to entry and higher returns on investment of about 10 per cent per annum.

Rental income from the BPO facility in Montego Bay is projected to deliver annual returns of eight per cent on investment.

It will be the company's second big investment in Montego Bay, following the deal with Blackstone Group to acquire the 489-room Hilton Rose Hall hotel for an undisclosed price. The company raised US$40 million through an 18-month bond to finance the purchase.

Miller said Tuesday that it was the first time that debt was used to fund acquisition of a portfolio resort property.

The fund's portfolio resorts - Jewel Dunn's River, Jewel Runaway Bay and Jewel Paradise Cove - saw annual revenue improve to US$50.8 million at yearend 2014, compared to US$35.4 million in 2013. The results, Miller said, were without leverage, indicating that the properties are debt-free.

"The hotels represent a ballpark value of $20 billion with no debt involved. They are owned free and clear," said Miller, who is also CEO of Sagicor Investments Jamaica Limited and executive vice-president/chief investment officer for Sagicor Life Jamaica.

Occupancy rates improved three per cent to 75 per cent, across the Jewel portfolio, moving from 149,950 room nights in 2013 to 202,949 room nights last year.

Miller added Thursday that without Jewel Paradise Cove, which just came on stream in 2014, occupancy levels would have been much higher.

The X Fund chief executive said he expected revenue to improve further in 2015 when Hilton Rose Hall is back on the market. Sagicor took control of the property in January. The hotel will continue to operate under the Hilton brand but will eventually be rebranded as a Jewel resort.

Sagicor X Fund made a profit of $942 million with return on equity of 11.2 per cent in 2013. The 2014 yearend results are pending, but its nine-month results to September indicated profit of $681.2 million to that point, and a similar amount of revenue.

The company has no operating expenses.