The group hopes to &lsquo rationalise its assets&rsquo in a way that will help them to grow bigger

 

PURPOSE-BUILT accommodation operator Centurion Corporation : OU8 0% said on Thursday (Feb 27) that the proposed real estate investment trust (Reit) comprising some of its worker and student accommodation assets will do &ldquo the heavy lifting&rdquo as the group focuses on becoming asset-light.

 

Chief executive Kong Chee Min said that the group has been aiming to grow its assets under management for some time, but does not need to hold on to the properties.

 

&ldquo The Reit will be able to take the heavy lifting of our assets,&rdquo he said. &ldquo We have a quite heavy asset base, so this is something the Reit vehicle will help us with.

 

&ldquo And because of that, we will be able to grow our premium even bigger.&rdquo

 

While he did not divulge details on the Reit&rsquo s make-up, he noted that it will be of a &ldquo reasonable size&rdquo , and feature mainly &ldquo stabilised assets&rdquo .

 

The exact assets to be included are still under discussion, particularly as some are currently in development, he said during a briefing after the group&rsquo s results announcement.

 

Centurion on Wednesday reported net profit of S$226.6 million for the six months ended Dec 31, 2024, up 97 per cent from S$114.8 million in the corresponding year-ago period. 

 

In January, the group announced that it was planning to establish a Reit, and is working with DBS and the Singapore branch of UBS to explore the proposal.

 

This is the second time the company has announced that it is exploring a Reit listing. In 2015, it considered plans for a Reit, and engaged Barclays, UOB and UOB Kay Hian to explore the possible transaction. These plans were later deferred.

 

The group&rsquo s management noted that in 2015, Centurion had considered establishing a pure-play purpose-built workers&rsquo accommodation Reit.

 

Since then, its portfolio has undergone many changes, including expanding to include purpose-built student accommodation.

 

The group later considered separating its student accommodation portfolio, which led to the revival of the idea for a Reit. However, its student accommodation portfolio was &ldquo not sizeable still&rdquo , said Kong.

 

The trust will, therefore, likely include both types of assets that are owned or operated by Centurion, added the group.

 

Some analysts noted that Centurion has a low net gearing ratio of 29 per cent and questioned why it decided to revisit its Reit listing plans at this time.

 

In response, Kong said that the group hopes to &ldquo rationalise its assets&rdquo in a way that would enable them to grow bigger, in addition to its asset-light strategy.

 

In any case, he added that the group still has expansion plans in the pipeline that requires capital expenditure, and cannot distribute &ldquo the kinds of dividends&rdquo that Reits can.

 

&ldquo Why now? We feel that it is the right time to do so, and that&rsquo s why we are taking a serious step to see whether the establishment of the Reit will be successful,&rdquo he said.

 

As part of the trust&rsquo s establishment, the company will consider giving out a dividend-in-specie of the proposed Reit&rsquo s units to existing Centurion shareholders.

 

 

Centurion Corporation has reported earnings of $344.8 million for the FY2024 ended Dec 31, 2024, up 125% y-o-y. For the 2HFY2024, earnings came up to $226.6 million, up 97% y-o-y. 

 

For FY2024, group revenue grew 22% y-o-y to $253.6 million, largely due to strong revenue contributions from both the group&rsquo s Purpose-Built Workers Accommodation (PBWA) and Purpose-Built Student Accommodation (PBSA) segments.

 

In the PBWA segment, revenue increased 24% y-o-y to $194.6 million. The segment&rsquo s average financial occupancy decreased marginally to 94% in FY2024 largely due to a reduction in Malaysia&rsquo s average financial occupancy which has beds unavailable during asset enhancement initiatives (AEI) works. 

 

The group&rsquo s PBWA segment in Singapore achieved financial occupancy of 99%. Revenue from Malaysia dipped slightly due to weaker Malaysian ringgit in FY2024. When translated in local currency, revenue was similar to FY2023. 

 

The group&rsquo s PBSA segment grew 17% y-o-y overall, and overall financial occupancy rose to 97% in FY2024 from 92% in the previous reporting period. 

 

A strong student demand in the UK coupled with ongoing PBSA shortage led to a revenue growth in the group&rsquo s 10 assets increasing 20%. Financial occupancy grew to 98% from 93% previously. 

 

In Australia, revenue grew 20% and financial occupancy rose to 96%. Centurion says Visa pressures continue to dampen interest from international students, but enrollment rates remain healthy and bookings for February 2025 remain on track.

 

The group&rsquo s PBSA assets in Hong Kong and China, are building up occupancy with expectations for take-up to increase nearing the start of the academic year in 3Q2025.

 

Cash and bank balances increased by $14.3 million largely due to proceeds received from the disposal of Westlite Bukit Minyak and Westlite Tampoi to KWAP, Malaysia&rsquo s public sector pension fund. The group&rsquo s balance sheet stood at $89 million in cash and bank balances as at end Dec 2024. 

 

The group&rsquo s borrowings reduced to $657.4 million as at Dec 31, 2024, and net gearing ratio stood at 29%. 

 

Centurion is proposing a final dividend of 2 cents per ordinary share. 

Centurion Corporation expects its FY2024 earnings to see a " substantial increase" over the preceding FY2023 ended Dec 31, 2023, thanks to net fair value gain on its investment properties.

 

The operator of workers' and students' dormitories had reported earnings of $175.9 million for its FY2023, itself a substantial increase of 131% over the preceding FY2022' s $76.3 million.

 

The company has on Jan 7 announced plans to spin off a separate REIT listing of its portfolio.

 

Between Jan 14 and 15, Centurion Corporation executive director and joint chairman David Loh acquired 10 million shares in two married deals, at S$0.935 per share. He also bought 200,000 shares on the open market at S$0.965 per share on Jan 15.

 

Tuan Sing CEO and director add to stakes

 

This increased his total interest in the global provider of specialised accommodation from 58.57 per cent to 59.78 per cent. His preceding acquisition was on Sep 17, 2024, with 300,000 shares purchased at S$0.74 per share. 

 

Centurion owns, develops and manages specialised accommodation assets across six countries globally. 

 

Loh is responsible for formulating corporate and business strategies, and leading the execution of strategic growth plans. He joined the company in May 2015 as a non-executive director and was appointed joint chairman of the board in November 2019. He transitioned to executive director in March 2021, and became chairman of the executive committee in January 2022.

 

He has more than 20 years of experience in the investment and brokerage industry. He has been principal and director of Centurion Global since April 2008. His previous roles included various directorial positions at UOB Kay Hian and OUB Securities, as well as a dealer at Ong & Company. 

 

In 2024, Centurion ranked among the 100 most traded Singapore stocks, with S$616,000 of average daily trading turnover compared to S$105,000 in 2023 when it ranked among the top 150 by turnover.

 

Prior to 2024, Centurion streamlined its listings by ceasing its listing on the Stock Exchange of Hong Kong in December 2023. The company&rsquo s shares also gained in 2024 on robust financial results which included a 25 per cent increase in revenue for 9M FY2024 to S$186.5 million.

 

For the first nine months of 2024, the purpose-built workers accommodation (PBWA) segment contributed 77 per cent of the group&rsquo s revenue, while the purpose-built student accommodation (PBSA) division contributed 23 per cent.

 

In terms of geographical distribution for the same period, Singapore accounted for 70 per cent of revenue, the United Kingdom contributed 15 per cent, Malaysia 8 per cent and Australia 7 per cent.

 

In November 2024, PBWA Westlite-PKNS Petaling Jaya received the Best CLQ Award at the Malaysia Urban Planning Awards, presented by the Ministry of Housing and Local Government through PlanMalaysia. 

 

Centurion anticipates continued positive demand-supply dynamics across its operating markets, which will help maintain high occupancies and healthy rental revisions. The group is also actively pursuing opportunities to redevelop and enhance its portfolio assets to meet evolving regulatory requirements and customer needs.

 

On Jan 7, it announced its exploration of a proposed transaction to establish a Reit that would include some of its workers&rsquo accommodation and student accommodation assets.

Over the five trading sessions from Jan 10 to 16, financial services and Reits have experienced the highest net institutional outflow, while telecommunications and industrials have had the most net institutional inflow

 

OVER the five trading sessions from Jan 10 to 16, institutions were net sellers of Singapore stocks, leading to a net institutional outflow of S$184 million, reversing the S$103 million net inflow over the preceding five sessions.

 

Stocks that led the net institutional outflow over the five sessions were DBS, CapitaLand Integrated Commercial Trust, Singapore Airlines, Singapore Exchange, Genting Singapore, Venture Corporation, OCBC, Hongkong Land, Centurion Corporation and CapitaLand Ascendas Reit.

 

Meanwhile, Singtel, Seatrium, Singapore Tech Engineering, UOB, Yangzijiang Shipbuilding, Sembcorp Industries, Suntec Reit, Wilmar International, Rex International and Yangzijiang Financial Holding led the net institutional inflow.

 

Consequently, over the five sessions, financial services and real estate investment trusts (Reits) experienced the highest net institutional outflow, while telecommunications and industrials saw the most net institutional inflow.

 

Twenty primary-listed companies conducted buybacks with a total consideration of S$39 million in the five sessions. The consideration tally was led by OCBC, which bought back 1.4 million shares at an average price of S$16.95 per share. This brings the total shares repurchased under the current mandate to 0.3 per cent of its issued shares (excluding treasury shares).

 

OCBC said that its repurchased shares are held as treasury shares, recorded as a deduction against share capital, and may be cancelled, sold, or used to meet employee share scheme obligations. The group is scheduled to announce its FY2024 (ended Dec 31) financial results on Feb 26, before the market open. 

 

Zheneng Jinjiang Environment bought back 731,600 shares at an average price of S$0.45 per share. This caused the China waste-to-energy operator to increase the total shares repurchased under its current mandate to 0.7 per cent of its issued shares (excluding treasury shares).

 

During the five trading sessions, 60 director interests and substantial shareholdings were filed for 30 primary-listed stocks. Directors or CEOs filed 22 acquisitions and one disposal, while substantial shareholders filed one acquisition and five disposals. 

 

 

Dormitory operator Centurion Corporation &rsquo s executive director and joint chairman David Loh has acquired 10 million shares for 93.5 cents per share via a married deal, bringing his total stake to 59.76%.

 

Loh is therefore deemed to have an interest in 425,756,125 shares. His spouse, Wong Wan Pei, holds 200,000 shares. 

 

Loh last acquired 300,000 new shares at 74 cents per share in Sept 2024. 

 

In June 2024, Loh purchased 538,600 shares over a two day period.

 

SHARES of accommodation-asset operator Centurion : OU8 +3.65% surged 6.3 per cent on Wednesday (Jan 8) following the previous day&rsquo s news that it is exploring a real estate investment trust (Reit) listing on the Singapore Exchange (SGX).

 

At 9.39 am, the counter had advanced 6.3 per cent or S$0.06 to S$1.02 from Tuesday&rsquo s closing price of S$0.96, hitting a high in more than a decade. The share price had soared to a high of S$1.19 in 2007.

 

No married deals were recorded based on ShareInvestor data. 

 

This follows the company&rsquo s announcement on Tuesday that it is exploring the establishment of a Reit, comprising some of its workers and student-accommodation assets.

 

If established, the Reit will be listed on the SGX&rsquo s mainboard, subject to approval from the bourse and the Monetary Authority of Singapore, the group said. 

 

Centurion chief executive officer Kong Chee Min said that the group is also considering a dividend-in-specie for some units in the proposed Reit.

 

The company also said that it is working with DBS and the Singapore branch of UBS to explore the proposal. It is considering details such as the terms and timing of the listing.

 

However, it advised shareholders that the proposed Reit listing is not guaranteed to take place or to occur in the form as described, as it will be subject to market conditions, commercial negotiations, and &ldquo relevant regulatory, shareholders&rsquo and other approvals&rdquo .

 

Centurion in January 2015 announced plans to explore setting up a Reit. It had planned to inject some of its worker accommodation assets into the trust. However, it said in March of the same year that it would defer and reconsider the proposal at a later date.

 

Centurion Corporation, on Jan 6, announced that it is exploring establishing a REIT.

 

The REIT will comprise some of the group&rsquo s workers and student accommodation assets. The proposed REIT will be sponsored by Centurion and listed on the Mainboard of the Singapore Exchange (SGX), the company revealed.

 

Centurion will be working with DBS Bank and UBS to explore the proposed transaction.

 

In line with the proposed listing, Centurion is considering distributing a dividend in specie of some of the units in the proposed REIT to its shareholders.

 

The details are currently &ldquo being explored&rdquo . The listing is also subject to approval from SGX and the Monetary Authority of Singapore (MAS).

 

With the signing of the draft Johor-Singapore special economic zone (JS-SEZ) set to take place in December, CGS International analysts Lim Siew Khee, Chehan Perera and Nazmi Idrus believe Malaysia could benefit more from the SEZ in the near term. This is based on ground checks conducted among CGSI&rsquo s counters in Malaysia and Singapore.

 

According to a release dated Nov 7, the Malaysia-Singapore Joint Ministerial Committee for Iskandar Malaysia (JMCIM) will look at signing the draft joint agreement for the JS-SEZ at the 11th Malaysia-Singapore leaders&rsquo retreat. While no official date has been announced, Johor Chief Minister Onn Hafiz Ghazi has indicated to Malaysian media hat the retreat could be held from Dec 8 to 9.

 

&ldquo Given the complexity of the joint agreement, we think the structure and incentives of JS-SEZ will be announced and rolled progressively, by sector,&rdquo the analysts write in their Nov 27 report.

 

While details are scarce at the moment, the memorandum of understanding (MOU) signed by Singapore and Malaysia in January this year specified that the JS-SEZ targets to draw in cumulative investments of RM636 billion ($192.12 billion) by 2030. Other targets include growing Iskandar Malaysia&rsquo s estimated GDP to RM158 billion and employment of 1.4 million workers. Iskandar Malaysia also aims to grow its average monthly household income to RM15,700 by 2030 from RM10,700 in 2025.

 

Several proposals have been made for the JS-SEZ including passport-free clearance, special tax arrangements, the easier movement of goods and joint promotions to improve cross-border businesses between both sides of the causeway. Other incentives have also been proposed, including competitive taxes such as a flat income tax rate of 15% for skilled foreign workers, lower than the individual income tax rate of 24% in Singapore and up to 305 in Malaysia. Eligible small- and medium-sized businesses (SMEs) may also get to enjoy a preferential tax rate of 15% to 17% for the first RMB600,000 in Malaysia and Johor.

 

Within the Malaysian counters, the analysts believe those in construction, utilities, real estate and technology are the largest beneficiaries of the JS-SEZ. This is followed by healthcare, financial services and plantations.

 

Specifically, the analysts have named companies within CGSI&rsquo s coverage as beneficiaries. They are: Eco World, Sunway Construction, Tenaga, Malakoff, YTL Power, banks such as Maybank, CIMB, RHB, SD Guthrie, Genting Plantations, VS Industries, SKP Resources, IHH and KPJ Healthcare.

 

In Singapore, Centurion emerged as the &ldquo clear winner&rdquo as it has eight workers&rsquo dormitories in Malaysia with 66% of them located in Johor.

 

&ldquo Our channel checks with other firms with operations in Johor indicate that execution is key, with most saying it is too soon to decide on expansion plans arising from the deal. However, companies believe tax breaks and streamlined regulatory processes will likely make Johor a more cost-effective investment destination,&rdquo the analysts write.

 

Meanwhile, data centre operators have highlighted the need for stability and availability of reliable energy sources for their future expansion plans in the zone. In June, The Edge Malaysia reported that Singapore Telecommunications (Singtel) was in talks to build a data centre in Johor, while The Edge Singapore took a closer look at the data centre industry in Johor in July, noting demand for spillovers from Singapore.

 

RTS may see retail leakage

 

The Rapid Transit System (RTS) Link, which is widely seen as the &ldquo most catalytic project&rdquo synonymous with the JS-SEZ, may see retail leakage from Singapore to Johor.

 

&ldquo [The] RTS could lead to an incremental 100,000 daily outgoing travellers to Johor from Singapore. We estimate 2.1% - 2.3% of retail sales leakage based on $100 - $110/day of spending and 50% of these travellers,&rdquo the analysts say.

 

They add that residents living in the northwestern parts of Singapore would account for most of this leakage due to their proximity to the RTS station in Woodlands.

 

In mid-July, The Edge Singapore ran a series of stories on the RTS and SEZ and the effects it would have on stocks including Genting Singapore' s Resorts World Sentosa (RWS), Frasers Centrepoint Trust (FCT) and ComfortDelGro (CDG).

 

FCT has the most malls located in Singapore&rsquo s northern regions among the retail REITs under CGSI&rsquo s coverage, the analysts point out. These malls account for 27% of FCT&rsquo s FY2024 net property income (NPI), which includes its joint venture (JV) stakes in Waterway Point and NEX, on a 100% basis.

 

Trade tariffs could boost collaborations

 

With pressures looming from potentially higher trade tariffs between the US and China, the analysts note that the zone could benefit even more from the China+1 supply chain diversification. To be sure, China was the largest investor in Iskandar Malaysia with RM61.9 billion worth of investments.

 

Some of the companies named include Singapore Exchange S68 (SGX)-listed GHY Culture & Media, ByteDance, Forest City, Kaifa and New World Development Company.

UOB Kay Hian (UOBKH) analyst Adrian Loh has maintained his &ldquo buy&rdquo call on Centurion Corporation OU8 , with an upgraded price of $1.11, from 85 cents previously, following Centurion&rsquo s business update for the 3QFY2024 ended Sept 30, released on Nov 13.

 

In its release, Centurion reported a stronger-than-expected 9MFY2024 revenue growth of 25% y-o-y to $186.5 million, driven by continued strong occupancies and positive rental reversions across its business segments.

 

This formed over 82% of UOBKH analyst Adrian Loh&rsquo s full-year revenue estimate.

Its purpose-built workers' accommodation (PBWA) and purpose-built student accommodation (PBSA) assets saw revenue growth of 27% and 20% y-o-y, respectively.

 

Centurion should see around 16% volume growth in both PBWA and PBSA segments during 2HFY2024 to 2HFY2026. Based on Loh&rsquo s estimates, around 66% of the growth will come from PBWAs in Singapore.

 

In addition, the company noted that it is currently looking at exploring opportunities for a potential development of around 7,000 beds in Iskandar, Johor, which Loh believes depends on the progress of the Special Economic Zone.

 

Centurion has also announced the establishment of a joint venture (JV) with Xiamen City Home Apartment to design, build or convert buildings into long-term professionally managed rental assets.

 

The consistent buying of shares by Centurion&rsquo s CEO and co-chairman is also a positive sign for the company&rsquo s near- to medium-term outlook, Loh notes.

 

Between March and September this year, both men purchased 2.39 million shares at prices ranging from 40 cents to 74 cents apiece.

 

For 1HFY2024, Centurion had available cash and banking facilities totalling $91 million. The company continues to lower to its gearing levels, at end 1HFY2024, Centurion has a net gearing of 34% versus 43% in 1HFY2023 and 38% at end-FY2023.

 

The company&rsquo s interest coverage ratio was 4.7 times with an average long-term debt maturity of five years.

 

Loh notes that there is potential for a higher dividend payout.

 

During the 1HFY2024 results, Centurion declared a dividend of 1.5 cents, implying a 26% dividend payout based on an earnings per share (EPS) of 5.77 cents from its core business operations.

 

Loh maintains a current forecast dividend of 3 cents for the full year, but he believes that there is a high likelihood of an upside to 3.5 cents given the better-than-expected earnings, implying a 2024 yield of 3.6% based on the closing share price on Nov 26.

 

Loh upgrades his 2024 to 2026 EPS by 2% - 11% to account for slightly higher rental reversions as well as volume growth in PBSA for Australia.

 

Loh&rsquo s new target price is based on a P/E multiple of 8.7 times, up from 7 times before. The new P/E multiple is &ldquo undemanding&rdquo , given Centurion&rsquo s earnings growth over the next two years, he says.

 

&ldquo We believe that the company&rsquo s current metrics are inexpensive, trading at FY2025 P/E of 8.1 times and 0.8 times P/B,&rdquo he adds. &ldquo Year to date, Centurion&rsquo s 135% share price increase easily outperformed the STI&rsquo s total return, and we expect continued outperformance in the next 12 months.&rdquo

Centurion has reported revenue of $62.1 million for the 3QFY2024 ended September, up 22% y-o-y from the same period last year. Revenue for 9MFY2024 rose by 25% y-o-y to $186.5 million. 

 

The higher revenue came on the back of strong occupancy rates and healthy rental revisions across the group&rsquo s portfolio of purpose-built workers accommodation (PBWA) and purpose-built student accommodation (PBSA).

 

Revenue for Centurion' s PBWA segment saw a 27% y-o-y to $143.8 million in 9MFY2024. Average financial occupancy dropped marginally to 95% for the period, due to ongoing asset enhancement initiative (AEI) works in Malaysia. 

 

The group&rsquo s PBSA 9MFY2024 revenue rose by 20% y-o-y to $42.1 million, due to improved financial occupancy and positive rental rate revisions across its PBSA assets in the UK and Australia. 

 

As at Sept 30, Centurion has nine PBWA including five operating purpose built dormitories and four quick build dormitories, comprising a total of 34,786 beds in SIngapore. In Malaysia, the group&rsquo s PBWA portfolio bed capacity stood at 27,373 beds as at Sept 30. 

 

For the same period, Centurion' s PBSA assets in Australia, the UK and the US had a portfolio of 897 beds, 2,786 beds, and 663 beds, respectively. 

 

On Sept 6, the group entered into an exclusive cooperation framework agreement with Xiamen City Home Apartment and established two joint ventures for build-to-rent (BTR) projects in Xiamen. 

 

Kong Chee Min,   CEO of Centurion Corporation OU8 , says: " Our resilient performance reflects the strength of our portfolio and effective capital management. Our strategic expansion into China, along with our ongoing asset enhancement initiatives and development pipeline, position us well for sustained growth.&rdquo  

 

She adds: &ldquo We remain committed to optimizing returns through our asset-light approach and strategic partnerships. While market fundamentals remain robust across our key markets, our priority is enhancing operational efficiency and unlocking value from our assets to deliver sustainable returns for our shareholders" .