138 Student Living stock triples in a month
The share price of real estate company 138 Student Living Jamaica, 138SL, which builds and rents dorms to students at The University of the West Indies, more than tripled in less than 30 days to become one of the top-performing stocks so far in 2019.
The stock moved from $1.63 in late January to over $5.30 on Wednesday.
Rather than market exuberance, trading experts see it as a recovery of the stock.
Investors had seen a large discount in the stock price, which at under $2 was trading at less than the company’s book value of about $8 per share. That’s to say that if the company sold all its dorms and other assets and paid off its debt, then shareholders, in theory, would get $8 per share for a stock most bought for a lot less on the market.
“One assumes the main thing Sagicor and others see is that the stated valuation of the properties would have the company book value at about $8 per share and 138SL is now trading at around 66 per cent to that,” said Mark Croskery, head of brokerage firm Stocks & Securities Limited. Sagicor Group Jamaica currently holds the largest block of shares in Student Living through various entities.
Croskery added that any further rise should come with a catalyst, namely, that of improved financials.
Sagicor Group holds 40.47 per cent or 167.7 million units of 138SL, and its chairman, Richard Byles, also chairs Student Living.
During the stock run, the volumes remained slim with only three trades above 400,000 units for the year so far, but there’s been small trades almost on a daily basis. The top 10 shareholders hold as much as 92 per cent of the stock and the top four, around 82 per cent.
“So it is a very illiquid stock,” Croskery said. “The large price upward movement has been on trading levels of roughly 500,000 units or less throughout the period as a benchmark from a daily standpoint.”
The stock traded at a low of $1.63 on January 28 and 29 then hit a year high of $5.80 on February 22. In the first week in February, it traded at $2.30, but by mid-month had surpassed $5.
Barita equity trader Ferris Jackson said that the movement followed the annual general meeting of 138SL in late January, rather than any change in fundamentals. He said comments by the chairman ignited confidence in the market, when Byles asserted that it was a good time to buy shares in the real estate company.
“Bear in mind that there is some amount of speculation involved and the possibility of a turnaround under Byles’ stewardship,” Jackson added, regarding the renewed interest in the stock.
That’s notwithstanding that Student Living posted higher revenues year-on-year, but made a net loss of $43.8 million for its December 2018 first quarter.
The equity trader says the relatively high book value per share to stock price “provides the basis for a possible turnaround”, and that the price, at over $5, is still below the $6.15 price the stock fetched a year earlier in January 2018.
“But the stock is illiquid, so the price movement in February can arguably represent the illiquid nature of the stock, which can cause wide fluctuations,” Jackson said.
The price movement in the stock increased its market capitalisation from $650 million to $2.2 billion. Its book value, or shareholder equity, is nearly $3.3 billion.