Big boost as Stanley Motta gets special economic zone status

Caribbean Business Report can confirm that Stanley Motta has been accorded with Special Economic Zone (SEZ) status, which will give the listed company a significant boost with its development plans.

The SEZ designation was acquired last month after much effort and compliance with regulations laid out by the Jamaica Special Economic Zone Authority. This designation will provide significant benefits for Stanley Motta going forward.

In Jamaica, SEZs are being established to attract foreign direct investment, alleviate large-scale unemployment and to develop and diversify the economy. Stanley Motta stands to gain significantly from this initiative since SEZ companies benefit from a reduced corporate tax of between 7.5 per cent and 12.5 per cent instead of the regular 25 per cent for other local companies.

Companies with SEZ designation benefit from duty-free importation, General Consumption Tax free importation, no requirement to pay the other port related taxes (additional stamp duty). In addition, SEZ status allows the company profits earned to be free from income tax for an indeterminate period.

Inside Stanley Motta’s 58 HWT business process outsourcing building.

By being accorded SEZ status, Stanley Motta should see some benefits for the stock price, which has fallen 17.0 per cent since the start of the year. Stanley Motta closed February 28th trading session at $4.95 and currently trades at a Price-To-Book P/B ratio of 0.94 X, which is above the Main Market Real Estate Sector Average of 0.85 X.

Companies use the price-to-book ratio to compare a firm’s market to book value by dividing the price per share by book value per share. An asset’s book value is equal to its carrying value on the balance sheet, and companies calculate it netting the asset against its accumulated depreciation.

In its just completed annual report for 2019 Stanley Motta reported total income for 2019 increasing by 55 per cent over 2018 when the company posted total income of $419 million, up from the $269.7 million posted in 2018. This is due to the 100 per cent occupancy of all rentable space for the full year, according to the company’s unaudited financial statements for the year ended December 31, 2019.

Stanley Motta Limited owns 58 Half Way Tree Road, a business process outsourcing and technology park. 58 HWT sits on approximately six acres of land at the nexus of Half-Way-Tree and New Kingston and constitutes over 200,000 square feet of commercial office space. The company, which listed on the Jamaica Stock Exchange in 2018 saw an 18 per cent increase in funds from operations and net operating income falling short of the anticipated $308 million for the year. 

These were driven by unexpected changes in the foreign exchange rate. In addition, there were further revaluation gains of $43 million for the year on the investment property, which helped to grow the balance sheet to  $4.8 billion.

Earnings per share (EPS) dropped from $ 2.72 per share in 2018 to 37 cents per share in 2019, representing an 86 per cent decrease. The Directors note that in the prior year the EPS was substantially greater due to a higher revaluation gain of $ 1.9 billion.