Sat | Nov 28, 2020

Sagicor X Fund writes down $7.5b of assets

Published:Friday | August 21, 2020 | 12:22 AM

Christopher Zacca, chairman of Sagicor Real Estate X Fund Limited.
Christopher Zacca, chairman of Sagicor Real Estate X Fund Limited.

Market investors have already priced in a slower-than-expected recovery for hotel investor Sagicor Real Estate X Fund, which this week posted widening losses of $3.6 billion for the April-June quarter.

The company wrote down assets in the quarter, including an impairment of investment in associate at $1.3 billion, loss from associate at $1.45 billion, and dilution of associate at $380 million.

Over six months, the impairments totalled $7.5 billion.

“It is expected that the improvement in international tourist arrivals will be more gradual than initially thought,” said Chairman Christopher Zacca in the preface to X Fund’s quarterly financial report.

Sagicor X Fund closed down on Monday but has traded flat at $7.75 per share since then. Year to date, the XFUND stock is down 16.6 per cent, averaging better than the broad market, which is down nearly 28 per cent. It’s one of the few companies on the Jamaica Stock Exchange whose book value at $9.68 per share is greater than its share price.

The company’s capital base shrank by more than $6 billion since last December to $30.2 billion in June.

The closure of hotels across the region to stem the spread of the pandemic led to a $3.6-billion consolidated quarterly loss for X Fund. Over six months, the losses widen to $8 billion, a third of which was attributed to non-controlling interests. It translated to losses for shareholders of $2.28 per share compared with positive earnings of $0.30 per share a year earlier.

Revenue, which comes mainly from hotel holdings, fell by half from $3.4 billion to $1.65 billion at half-year. Most of the fallout was in the June quarter, which recorded revenue of just $309 million, compared to $1.63 billion in the similar quarter of 2019. The company has direct holdings in the Jewel Grande in Montego Bay and DoubleTree in Orlando, Florida, but it also owns shares in Playa Hotels & Resorts.

The Jewel Grande holding, which is operated on X Fund’s behalf by Playa, resumed full service on July 1, with the phased reopening of the tourism sector and the broader economy.

“The reopening of the tourism sector has improved the outlook for our business activities. However, with uncertainty surrounding patrons’ confidence in leisure and travel activities, a non-cash impairment charge of $5.20 billion was recorded on our investment in associated company Playa,” said Zacca.

In June, Playa announced the issue of 4.88 million ordinary shares priced at US$4.10 per share and additional debt financing of US$204 million. The transaction led to a 0.56 per cent reduction in X Fund’s holdings, leading to a loss on dilution of $380 million, stated the company.

Sagicor Real Estate X Fund Limited, incorporated in St Lucia, is 51.5 per cent owned by the Sagicor Pooled Pension Investment Funds, which are administered by Sagicor Life Jamaica Limited. The other significant shareholders in X Fund are Sagicor Group Jamaica Limited with 21.1 per cent, and Sagicor Segregated Funds with 8.09 per cent.