X-Fund Sees First-Quarter Recovery While 138SL Reports A Dip in Profit

• X-Fund reported a net profit of $181.61Mn for its first quarter ended March 31, 2022, up from the net loss of $203.20Mn recorded in the corresponding period in 2021. However, 138 Student Living (138SL) reported a 7.0% year over year decline in net profit for the first half of its financial year. 
• X-Fund’s positive net earnings were driven by an increase in hotel revenues, amidst the relaxation of local and international travel restrictions. There were higher occupancy levels and increased bookings for corporate and individual events during the first quarter. Notably, the improvement in hotel revenues for Q1 2022 was a 17% increase over pre-pandemic levels. 
• Similarly, 138SL’s average occupancy levels also increased by 5% to 56% supporting a 10.4% increase in revenues in Q1 and 9.3% in H1. However, a 58.0% increase in finance costs, due to renegotiations in its long-term liabilities, influenced the decline in net profit. 
• We expect that X-Fund will continue to see an earnings recovery in the coming months supported by greater tourist arrivals as business travel gains momentum, which will buttress its hotel revenues.  This outlook is supported by a survey by USA Travel Association which indicated that 77% of business travelers and 64% of employed Americans agreed that is important to return to business trips. On the other hand, 138SL’s occupancy levels may remain significantly below pre-pandemic levels as tertiary institutions continue to administer online classes, which may affect short-term profitability if costs are not contained. 
• X-Fund has witnessed a 2.2% depreciation in its stock price year-to-date, while 138SL has seen a 2.2% increase. X-Fund and 138SL currently trade at P/Es of 24.4x and 8.5x, which are above and below the Main Market Real Estate Sector Average of 12.6x, respectively.

(Source: Company Financials and NCBCM Research)