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Centurion Q1 revenue up 30% to S$61.1 million on higher rents
DORMITORY and student accommodation operator Centurion Corporation&rsquo s : OU8 0% revenue rose by 30 per cent to S$61.1 million for the first quarter ended Mar 31, from S$47.1 million in the year-ago period.
This was driven mainly by continued positive rental rate revisions and increased occupancies in Centurion&rsquo s purpose-built workers accommodation (PBWA) and purpose-built student accommodation (PBSA) assets globally, the group said on Thursday (May 9).
Revenue from the PBWA segment grew 31 per cent to S$46.2 million, from S$35.2 million in the year-ago period. Revenue from the PBSA segment grew 25 per cent to S$14.7 million, from S$11.7 million the year before.
Kong Chee Min, chief executive officer of Centurion Corporation, said: &ldquo We continue to see sustained demand and healthy rental revisions in our student and worker (accommodations) across the markets where Centurion operates. We will continue to enhance our portfolio and explore opportunities for growth in existing and new markets.&rdquo
Financial occupancies in the group&rsquo s PBWAs in Singapore rose to 99 per cent in Q1 2024, from 98 per cent in Q1 2023. Revenue in the three months ended March was S$41.6 million, compared with S$30.5 million in the year-ago period, as tenancies renewed at prevailing higher rental rates last year.
In Malaysia, the group added 290 beds in Q2 and 770 beds in Q4 through asset enhancement initiatives. Revenue was S$4.8 million in Q1, compared with S$4.9 million a year ago, due primarily to the weaker Malaysian ringgit.
In the United Kingdom, continued shortage in PBSA supply in the five cities where Centurion Corporation operates, coupled with higher demand from both domestic and international students, led to strong occupancies and rental revisions. The group&rsquo s UK revenue increased 28 per cent to S$10.4 million in Q1.
Its PBSA revenue in Australia grew 25 per cent year on year to S$3.9 million in Q1, boosted by healthy rental revisions as demand for accommodations exceeded supply.
Kong said the group, mindful of continued macroeconomic challenges, will continue practising &ldquo prudent financial management... to create greater value&rdquo for shareholders.
An interesting move. There is a big shortage of university accomodation in HK especially with the increasing number of mainland students studying there.
Centurion unit sets up JV company to lease, refurbish Hong Kong property
ACCOMMODATION assets operator Centurion Corporation : OU8 +1.18% on Tuesday (Apr 9) said its wholly owned subsidiary Centurion Overseas Investments has established a 60 per cent-owned unit &ndash Centurion-Lionrock (HK) &ndash for the key purpose of leasing a building in Hong Kong.
This marks Centurion' s foray into the Hong Kong market, and it has the intention of refurbishing the property and turning it into an accommodation with a total capacity of 66 beds to house primarily students, the company said in a filing to the Singapore bourse.
The remaining 40 per cent of Centurion-Lionrock (HK) is owned by an independent third party and joint venture partner, LionRock Property.
The property in question is situated at 177 Prince Edward Road West in Kowloon, Hong Kong, and has a capacity of 66 beds.
It will be refurbished to house students under Centurion' s dwell student accommodation brand and management platform pursuant to a license agreement between Centurion Overseas Investments and Centurion-Lionrock (HK).
The proposed refurbishment is expected to be completed and operational in September, and the projected cost of the refurbishment and initial working capital is about HK$11.5 million (S$2 million). This will be funded by a shareholder loan at an annual interest of 8 per cent from Centurion Overseas Investments.
The master lease of the property commenced on Apr 5, for a term of five years. There are options to renew the least for three years and a further two years under the master lease agreement, Centurion said.
The company added that LionRock specialises in sourcing assets and repositioning them to optimise use and returns, and has had the experience in managing student accommodation in Hong Kong since 2013.
Centurion said the transaction is not expected to have a material impact on its consolidated net tangible assets or earnings per share for the fiscal year ending Dec 31.
Good set of results. But at some point they should be focusing on derisking their b/s.
Analysts bullish on Centurion Corp following robust FY2023 results
Analysts at CGS International and UOB Kay Hian are both keeping their &ldquo buy&rdquo calls on Centurion Corp at respective raised target prices of 63 cents from 60 cents previously and 57 cents from 50 cents previously, following the company&rsquo s FY2023 ended Dec 31, 2023, results.
CGS analyst, Ong Khang Chuen writes: &ldquo We deem the results as slightly above expectations, with FY2023 core profit after tax and minority interests (patmi) of $69 million, or 21% higher y-o-y, coming in at 102% of our estimates and 103% of Bloomberg consensus estimates.&rdquo
With its stronger earnings, the company has declared a final dividend per share (DPS) of 1.55 cents, taking the total FY2023 DPS to 2.5 cents, translating to 5.9% dividend yield.
Ong notes that Centurion&rsquo s revenue outlook for FY2024 remains positive, thanks to strong rental reversions for Singapore due to the continued sizable gap between spot and average rents currently.
&ldquo We believe Singapore worker dorm rents will stay at high levels in the medium term, as supply remains constrained through 2030 with dorm operators having to carry out retrofitting works in response to the Ministry of Manpower&rsquo s (MOM) plan to de-densify dorms to improve worker living conditions. Overseas, Centurion said it expects occupancies for Australia to remain healthy for the academic year commencing February,&rdquo he adds.
As at the end of FY2023, assets under the company&rsquo s management hit $2 billion, with multiple asset enhancement initiatives (AEIs) planned across its operating geographies.
Centurion is also actively exploring capital recycling and merger and acquisition (M& A) opportunities.
On its the company&rsquo s December 2023 sale and leaseback agreement of two properties with Kumpulan Wang Persaraan (KWAP) in Malaysia, Ong notes: &ldquo We think more could be recycled upon asset maturity for Centurion to shift towards an asset-light model in Malaysia for capital to be deployed towards higher yielding markets and assets.&rdquo
&ldquo Its valuation at FY2025F price-to-earnings ratio (P/E) of 4.6x, 1.5 standard deviation (s.d.) below the 10-year mean, or 0.4x price-to-book value ratio (P/BV), is undemanding in our view,&rdquo concludes the analyst.
Re-rating catalysts noted by Ong include continued strong rental reversion and successful execution of its capital recycling strategy, while downside risks include a steeper increase in financing costs, and lower bed capacity utilisation on increased supply.
Meanwhile, UOB analyst Adrian Loh is similarly pleased with Centurion&rsquo s results, writing that even without the company' s valuation gain of $79 million on its investment properties, its operational results were strong, with revenue rising by 15% y-o-y and core net profit rising 20% y-o-y to $84 million.
Loh continues: &ldquo Gross profit margin was 9% higher than our estimates, and rose nearly 4 percentage points (ppts) to 72.4% on the back of strong occupancy rates and improved rental rates across all of the company' s asset classes.&rdquo
He also notes that the company&rsquo s purpose-built workers' accommodation (PBWA) continues to be its &ldquo pillar&rdquo , while its purpose-built students&rsquo accommodation (PBSA) continues to see growth thanks to demand.
&ldquo Centurion' s PBSA assets across the UK and Australia saw 3 ppts and 15 ppts growth in occupancy rates respectively to 93% and 88%,&rdquo writes Loh.
The analyst adds: &ldquo Both countries remain strong magnets for international students with the company commenting that it has experienced strong pre-bookings for academic year 2024/2025 for its UK assets, while occupancies are likely to continue to edge upwards in Australia.&rdquo
Following this, Loh has raised his FY2024 and FY2025 net profit estimates by 10% and 12% respectively.
He writes: &ldquo We highlight that there is upside potential to our earnings as we have yet to include some of the company' s growth projects in our estimates at present.&rdquo
Loh adds that Centurion&rsquo s share price has risen 26.5% in the past 12 months, easily outperforming the Straits Times Index&rsquo s (STI) 3.9% fall in the same period, concluding: &ldquo We remain confident that the stock can maintain its absolute and relative outperformance in FY2024.&rdquo
Share price catalysts noted by him include the company&rsquo s successful capital recycling efforts or capacity expansions involving joint ventures (JVs) which could result in a more asset-light business model that thus requires less capital intensity, as well as a higher-than-expected dividend payout across FY2024.
Centurion sees robust demand for worker dorms but warns rents not expected to keep rising
MAINBOARD-LISTED Centurion Corp : OU8 -3.41% will benefit from robust demand for worker beds, but its chief executive officer cautioned that rents &ldquo will not keep going up&rdquo .
Rental rates across the market have generally stabilised, but continue to increase with demand, CEO Kong Chee Min said in an earnings briefing on Thursday (Feb 29).
This increase is likely to be fed by the expected S$32 billion to S$38 billion in contracts to be awarded by the Building and Construction Authority from 2025 to 2028, as well as an increasing number of work permit holders in the construction, marine and process (CMP) sectors, Centurion noted.
The briefing comes after the specialised accommodation assets operator on Wednesday posted a net profit of S$114.8 million for the six months ended Dec 31, 2023, a 198 per cent hike from S$38.5 million in the corresponding year-ago period.
The substantial increase in net profit can be attributed to a net fair-value gain on its investment properties of S$84.8 million in FY2023, up from S$19 million.
Excluding fair-value adjustments and one-off items, net profit from the group&rsquo s core business operations rose 21 per cent in FY2023 to S$69.2 million, from S$57.1 million a year ago.
Kong said the company&rsquo s rental rate reversions for purpose-built dormitories in Singapore on a whole-year basis was about 24 per cent, with higher growth in the second half of the year as leases expired.
The market range for rents is around S$450 to S$600, with Centurion &ldquo pretty much in the middle&rdquo , he said.
However, rates have generally moderated despite the demand for beds, the CEO noted.
The moderation of rates comes as the government has implemented more ways for employers in the CMP sectors &ndash where most of Centurion&rsquo s worker dormitory business comes from &ndash to house their workers, such as through temporary quarters in construction sites.
That said, the company has a &ldquo good enough&rdquo pipeline of customers to ensure that if a client exits, there will be a replacement to take up the vacancy, said Kong.
Meanwhile, in line with the Ministry of Manpower&rsquo s (MOM) scheme to improve worker dormitories&rsquo living conditions, dormitory operators will likely have to retrofit their existing offerings, which will result in fewer beds.
In Centurion&rsquo s case, the management previously guided for a 3 to 11 per cent decrease. In comparison, Kong believes the overall market will face a reduction of 15 per cent.
This lower decrease is due to some Centurion dormitories already meeting the requirements of MOM&rsquo s scheme, such as having en-suite toilets, noted Kong.
The company&rsquo s plan to redevelop some of its properties is in the works, with redevelopment at Westlite Toh Guan in progress and pending at Westlite Mandai.
Centurion is also working to rationalise its portfolio of assets under management, which currently stands at around S$2 billion &ndash &ldquo still too small&rdquo a number, said Kong.
&ldquo We know that size is important, so we wanted to grow the portfolio... this means (employing) an asset-light strategy,&rdquo he said.
One example of this is its sale and leaseback agreement with Kumpulan Wang Persaraan, Malaysia&rsquo s largest public-sector pension fund, for purpose-built worker accommodations Westlite Bukit Minyak and Westlite Tampoi in Malaysia.
After divesting the properties for RM227 million (S$65.2 million), it will lease back the properties from the fund for 15 years from completion of the sale.
In redeploying its capital towards its portfolio, the company therefore elected not to declare a special dividend, but instead increased its total dividend to S$0.025 per share, up from S$0.01 per share in FY2022, said Kong in response to queries about its dividend payout.
The company does not have a dividend policy, but he said that it is cognisant of the need to reward shareholders.
&ldquo If you look at our consistency in paying out dividends, the proportion in comparison with our cash flow has always been consistent, with the exception of Covid,&rdquo Kong said.
Centurion H2 net profit up 198% to S$114.8 million, powered by demand for specialised accommodation
SPECIALISED accommodation assets operator Centurion Corporation : OU8 +2.33% reported a net profit of S$114.8 million for the six months ended Dec 31, 2023, a 198 per cent jump from S$38.5 million in the corresponding year-ago period.
The results translate to an earnings per share of S$0.1821, up from the earnings of S$0.085 per share in H2 2022.
The group said in a bourse filing on Wednesday (Feb 28) that the substantial increase in net profits can be attributed to a net fair-value gain on its investment properties of S$84.8 million in FY 2023, up from S$19.0 million in the previous financial year.
Excluding fair-value adjustments and one-off items, net profit from the group&rsquo s core business operations rose 21 per cent in FY 2023 to S$69.2 million, from S$57.1 million in FY 2022.
In FY 2023, Centurion&rsquo s revenue grew 15 per cent year-on-year to S$207.4 million, on the back of strong revenue contributions from the group&rsquo s portfolio of purpose-built workers accommodation and purpose-built student accommodation across markets in which the group operates.
The group was operating 34 purpose-built workers&rsquo and student accommodation assets, totalling 67,377 beds in Singapore, Malaysia, Australia, the UK and the US as at Dec 31, 2023.
The robust growth trajectory is further reflected in the 22 per cent jump in H2 2023 revenue to S$109.3 million, up from S$89.9 million in the same period in the year before, noted the group.
Centurion&rsquo s chief executive Kong Chee Min said that &ldquo the continued positive demand and supply dynamics in the specialised accommodation landscape have enabled the group to achieve healthy occupancies and positive rental rate revisions globally, effectively cushioning cost increases from inflation and the higher interest rate environment&rdquo .
The board of directors has proposed a second and final dividend of S$0.015 per share, bringing its dividend for the full financial year to S$0.025 per share.
If approved by the shareholders, the final dividend will be paid out on May 31.
Looking like the business continuing to recover well from the COVID era. Well managed.
Centurion expects &lsquo substantial increase&rsquo in net profit for FY2023
CENTURION : OU8 +2.56% on Tuesday (Feb 13) said that it expects to report a &ldquo substantial increase&rdquo in its net profit for the financial year ended Dec 31, 2023, compared to the year before.
The property player said the increase is largely due to &ldquo net fair value gains on the group&rsquo s investment properties expected to be recognised in FY2023&rdquo .
Its final set of results are set to be released on Feb 28, after trading hours.
PROFIT GUIDANCE ON UNAUDITED FINANCIAL RESULTS FOR THE FULL YEAR ENDED 31 DECEMBER 2023
The Board of Directors (&ldquo Board&rdquo ) of Centurion Corporation Limited (the &ldquo Company&rdquo , and together with its subsidiaries, the &ldquo Group&rdquo ) wishes to announce that, based on a preliminary assessment of the Group&rsquo s unaudited consolidated management accounts for the full year ended 31 December 2023 (&ldquo FY2023&rdquo ) and the information currently available, the Group is expected to report a substantial increase in the consolidated profit attributable to equity holders of the Company for FY2023 as compared to FY2022. Such an increase is mainly attributable to net fair value gains on the Group&rsquo s investment properties expected to be recognised in FY2023.
The Board of Directors (&ldquo Board&rdquo ) of Centurion Corporation Limited (the &ldquo Company&rdquo , and together with its subsidiaries, the &ldquo Group&rdquo ) wishes to announce that, based on a preliminary assessment of the Group&rsquo s unaudited consolidated management accounts for the full year ended 31 December 2023 (&ldquo FY2023&rdquo ) and the information currently available, the Group is expected to report a substantial increase in the consolidated profit attributable to equity holders of the Company for FY2023 as compared to FY2022. Such an increase is mainly attributable to net fair value gains on the Group&rsquo s investment properties expected to be recognised in FY2023.
RHB, KGI stay upbeat on Centurion Corp following sale-leaseback move
RHB Bank Singapore' s Alfie Yeo has kept his ' buy' call and 62 cents target price on Centurion Corp, on optimism that the dorm operator' s asset-light strategy is taking shape.
On Dec 4, Centurion announced that it has signed a sale and leaseback agreement with Malaysia' s public sector pension fund, Kwap, for two of its dorms for RM 27 million.
Under the terms of the deal, Kwap will enjoy a rental yield of 6.5 to 7% from Centurion, which will continue to be the operator of the dorms.
Yeo, in his Dec 8 note, expects Centurion to divest more properties over the mid to longer term.
" Special dividends could also be on the cards, provided there is no use of sales proceeds for reinvestment," he says.
Yeo is reiterating his positive stance on Centurion Corp, with growth going forward driven by better capacity, occupancy, and rental rates.
The stock now trades ' attractively' at -1.5SD from its mean P/E. His target price of 62 cents is based on 7.5x FY2024 earnings, which is below its 7-year historical mean.
Separately, KGI Securities is too upbeat on this sale and leaseback move and has also reiterated its " buy" call and 56 cents target price.
" This strategic move aligns with Centurion&rsquo s portfolio rationalisation and asset-light growth strategy, allowing the company to recycle and deploy capital for further expansion," says KGI on Dec 8.
Meanwhile, KGI notes that Centurion remains an asset-heavy model for now. As such, the peak rate and ensuing rate cut cycle is the largest tailwind for the company.
" Besides, the overall portfolio is healthy along with recovering cash flows as worker and student dormitories are in demand in the post-COVID period. Furthermore, the potential lower refinancing rate and interest burden will help improve profitability," adds KGI.
Centurion inks RM227 million sale-and-leaseback deal with Malaysia&rsquo s KWAP
PROPERTY player Centurion : OU8 0% is selling two of its assets in Malaysia to the country&rsquo s largest public sector pension fund, Kumpulan Wang Persaraan (KWAP), for a total consideration of RM227 million (S$65.2 million).
This is above the properties&rsquo collective net tangible asset value of RM224.3 million as at Jun 30, 2023, noted the group on Monday (Dec 4).
The company has also agreed to lease back the properties from KWAP for a period of 15 years from completion of the sale.
Centurion owns, develops and manages purpose-built worker and student accommodation facilities.
The company said its latest deal is part of an ongoing strategic rationalisation of Centurion&rsquo s portfolio assets, aiming to recycle and deploy capital into growing its portfolio of assets under management.
The deal is also aligned with Centurion&rsquo s strategy to grow its business via asset-light means.
&ldquo This sale-and-leaseback transaction exemplifies the strategy by which Centurion intends to optimise its capital, enlarge its portfolio and expand revenue streams. The group will pursue this model and similar asset-light strategies for synergistic, scalable growth of its specialised accommodation business across all global markets moving forward.&rdquo
Both properties being divested by Centurion are purpose-built workers accommodation (PBWA) assets built on freehold land.
One of the two PBWAs, Westlite Bukit Minyak, is located in Penang and has a total capacity of 3,321 beds. It comprises three eleven-storey accommodation blocks across 16,398 square metres (sq m).
The other asset in Johor, Westlite Tampoi, is made up of six accommodation blocks with a total capacity of 5,790 beds. The property spans some 28,328 sq m.
&ldquo This divestment presents an opportunity for the group to unlock value, drive further portfolio enhancements in an asset-light manner, and at the same time allows the group to remain invested in Malaysia&rsquo s growing need for quality worker accommodations going forward,&rdquo said Centurion chief executive Kong Chee Min.
KWAP chief investment officer Hazman Hilmi Sallahuddin added that he expects such an investment to &ldquo generate attractive risk-adjusted returns, foster social impact, and support industrial investments in Malaysia&rdquo .
Centurion said it does not expect the transaction to have a material impact on its consolidated net tangible assets, nor earnings per share, for its current financial year ending Dec 31, 2023.
Looks like they can increase rental rates in SIngapore in a way that will compensate for the de-densification specifications.
Centurion reports 3QFY2023 revenue of $51.0 mil, 15% higher y-o-y
Centurion has reported revenue of $51.0 million for the 3QFY2023 ended Sept 30, 15% higher y-o-y. The company&rsquo s revenue for the 9MFY2023 rose by 10% y-o-y to $149.0 million.
The higher revenue was attributed to the continued increases in occupancies of its Singapore and Malaysia purpose-build workers accommodation (PBWA), Australia purpose-build student accommodation (PBSA) as well as improved rental rates across its Singapore, Malaysia, UK and Australia properties.
Revenue for Centurion&rsquo s workers accommodation rose 16% y-o-y to $40.1 million for the 3QFY2023 while student accommodation revenue rose by 15% y-o-y to $10.8 million. This was offset by others, which fell by 58% y-o-y to $165,000.
Centurion&rsquo s PBWA 9MFY2023 revenue rose by 12% y-o-y to $113.5 million due to upward rental revisions and near-full occupancies at its Singapore Westlite accommodations. Its PBWA in Malaysia also saw better occupancies and positive rental reversions.
The company&rsquo s PBSA 9MFY2023 revenue rose by 10% y-o-y to $35.0 million as bookings and financial occupancies across its PBSA assets in the UK and Australia continue to do well due to the return of international students in 2023.
As at Sept 30, Centurion has nine PBWA including five purpose-built dormitories (PBDs) comprising 27,530 beds and four quick-build dormitories (QBDs) comprising 7,256 beds in Singapore. In Malaysia, its PBWA portfolio bed capacity stood at 26,603 beds as at Sept 30.
Centurion&rsquo s PBSA assets in Australia, the UK and the US had a portfolio of 5,218 beds as at Sept 30.
&ldquo Centurion&rsquo s growth has gained momentum in 2023, reflecting the resilience and sustainability of the Group&rsquo s PBWAs and PBSAs. As part of our ongoing strategic review, the group has also continued to enhance and expand its portfolio of assets under management in line with market dynamics, exercise prudent financial management, and be on the lookout for opportunities in new markets, such as the Middle East. To deliver sustainable long-term value to our stakeholders, the group will continue to strategically review our markets and assets, pursue asset enhancement initiatives to enhance our portfolio and augment revenue streams,&rdquo says Centurion&rsquo s CEO Kong Chee Min.
Centurion partners Abu Dhabi staff housing company to expand in the Middle East
SPECIALISED accommodation assets player Centurion Corporation : OU8 +2.6% has signed a memorandum of understanding (MOU) with Abu Dhabi&rsquo s largest staff accommodation company, KEZAD Communities, to explore collaboration in the Middle East region.
Inked on Saturday (Oct 21), the MOU forms the basis for closer collaboration between both parties to capture opportunities amid rising demand for staff accommodation in the region, said Centurion on Monday.
Centurion will explore different business opportunities, such as the development of deal structures and joint ventures in the region, while leveraging KEZAD Communities&rsquo on-ground expertise.
The partnership will also help Centurion to expand its presence to accommodation markets in the Middle East.
Chief executive officer of Centurion Kong Chee Min noted that the company is always looking for opportunities in new markets to enhance its portfolio.
&ldquo This partnership opens a new chapter for Centurion to explore possibilities in an exciting region where demand for purpose-built worker accommodation is set to increase with tightening regulations on workers&rsquo welfare.&rdquo
RHB expects neutral impact on Centurion Corp despite dormitory upgrades by 2030
RHB Bank Singapore analyst Alfie Yeo is keeping his &ldquo buy&rdquo call on Centurion Corp as he remains positive on the counter after the Singapore government announced that it plans to upgrade the living conditions at dormitories by 2030.
On Oct 11, the Ministry of Manpower (MOM) said that it plans to transition around 1000 existing purpose-built and factory-converted dormitories approved or operational before Sept 18, 2021 to improved standards under the Dormitory Transition Scheme (DTS).
These changes require dormitories to enhance their occupancy to below 12 residents a room, with living space upgrades of more than 3.6 square metres (sqm) per resident, along with isolation spaces such as ensuite toilets, showers, and kitchen facilities.
With the changes, Centurion will have to reduce its current capacity of 14 to 16 beds per room to 12 beds per room.
However, the transition will only begin in 2027 and end by 2030 as the bed supply situation remains tight.
&ldquo We believe the overall impact on Centurion is neutral due to the longer-term nature of this development,&rdquo writes Yeo, adding that the immediate impact on the stock as well as his current earnings outlook and forecasts, is neutral.
To the analyst, delaying the transition till 2027 will allow more new dormitories to come on-stream in the market and boost overall bed supply.
&ldquo There are at least seven new purpose-built dormitories with a total of 47,000 beds expected to be completed over the next five years before the existing bed supply marginally reduces due to the current development,&rdquo he notes.
Of Centurion&rsquo s nine dormitories in Singapore, five of its purpose build dormitories (PBDs) with a total capacity of 27,530 beds will be affected, while four of its quick build dormitories (QBDs) will remain unaffected. Excluding the Ubi Avenue 3 dormitory and QBDs, this amounts to an estimated 3% to 11% reduction in Centurion&rsquo s Singapore PBD capacity by 2030.
&ldquo Centurion is well placed to comply with the new standards ahead of time,&rdquo says Yeo.
Furthermore, the analyst points out that Centurion has already planned to re-develop the Westlite Toh Guan and Mandai dormitories and can now conveniently incorporate the latest changes into its plans. &ldquo There may also be government grants to help defray the transition costs.&rdquo
&ldquo We continue to like Centurion for its leadership position in Singapore&rsquo s worker dormitory market, where supply remains tight. We make no changes to our forecasts for now,&rdquo writes Yeo.
Key drivers noted by the analyst include the expansion of purpose-built workers accommodation (PBWA) or purpose-built student accommodation (PBWA) assets, whilst key risks rest on the analyst&rsquo s earning forecasts, which are premised on better occupancies at the company&rsquo s PBSA assets and bed rates. Failure to achieve these revenue drivers poses downside risks to estimates.
In addition to his &ldquo buy&rdquo call, Yeo has kept his target price unchanged at 62 cents. His target price is pegged to 7.5x Centurion&rsquo s FY2024 P/E, which is below its seven-year historical mean. At its share price of 40 cents as at Yeo&rsquo s report on Oct 13, Centurion is trading at an attractive -1.5 standard deviation (s.d.) of its mean P/E with a 5% dividend yield.
I wonder if Centurion can increase per bed prices to compensate for this?
Centurion Corp' s reduced dormitory bed capacity likely with MoM announcement
Centurion Corp is likely to be impacted by the Ministry of Manpower in Singapore announcement of a Dormitory Transition Scheme (DTS) for existing dormitories approved or operational before Sept 18 2021 to transition to improved Interim Dormitory Standards (IDS). The aim is to strengthen resilience against future pandemics and enhance liveability.
Key interim specifications in the IDS include requirements for a maximum of 12 residents per apartment unit, living space of at least 3.6 sq m per resident, toilets and showers to be ensuite in the apartment units, and more stringent requirements in the isolation facilities of 1% of bed capacity in normal times and additionally 1.5% during a pandemic.
The Ministry has also specified that operators of existing dormitories have a period of four years between 2027 and 2030, beginning three years from now, to transit under the DTS. MOM has also stated it would consider providing financial support to partially defray the costs to dormitory operators of retrofitting existing buildings to meet new DTS.
Centurion Corp is likely to be impacted by the new regulations. It has already planned for partial redevelopment of two of the PBDs, Westlite Toh Guan and Westlite Mandai, sitting on long leasehold and freehold land respectively. The company received provisional permissions for the redevelopment and plans to substantially complete the added dormitory bed supply ahead of 2027, when the transition period begins.
Depending on the details and the extent of the retrofitting for each of five PBDs, which Centurion will undertak in consultation with the relevant authorities, and the planned redevelopments of Westlite
Toh Guan and Westlite Mandai, Centurion estimates a reduction of between 3% to 11% of its total PBD bed capacity in Singapore by the transition period ending 2030.
Lim and Tan keeps ' buy' on Centurion Corp as dormitory outlook remains positive
Lim and Tan Securities analyst Chan En Jie is maintaining his &ldquo buy&rdquo call and target price of 58 cents on Centurion Corporation OU8 0.00% , whose outlook remains positive with positive rental reversions and a healthy pipeline of dormitory beds.
Given the sharp rise in work permit holders in the construction, marine shipyard and process sectors from 370,000 pre-Covid to 434,000 as at May 2023, more workers are being housed in non-dormitory accommodations, such as residential properties, hotels and hostels.
However, Chan notes in his report dated Sept 20 that demand for dormitory housing is likely to increase after the Ministry of Manpower (MOM) announced a need to moderate demand for non-dormitory accommodation to ensure workers have access to designated accommodations.
Since April this year, all dorms have been regulated under more stringent requirements of the Foreign Employee Dormitories Act (FEDA). &ldquo The shift in demand back to dormitory housing, coupled with the demand-supply mismatch where upcoming new purpose-built developments will only begin operations in 2025, will likely benefit dormitory players like Centurion,&rdquo says the analyst.
With effect from Sept 19, MOM requires proof of accommodation for new foreign workers before they are allowed to enter Singapore. Approval will be granted within a week for workers staying in dormitories, significantly faster than about six weeks or more for workers housed in non-dormitory properties.
&ldquo Time is of the essence for employers in the booming construction and oil and gas sectors trying to catch up on projects delayed during the pandemic,&rdquo says Chan, who notes that regulatory demand will also benefit well-established dormitory players like Centurion.
Going forward, he believes Centurion enjoys top-line visibility and has the pricing power to increase rates, if necessary. Thus far, the company&rsquo s bed rates have been &ldquo tracking&rdquo the average rates of $420 per month provided by MOM, indicating &ldquo room to grow&rdquo compared to its competitors who are already charging upwards of $500 to $600 per month.
Chan adds that the company&rsquo s higher rental rates which began in 4QFY2022 have not been fully factored into its topline, with Centurion expecting the full impact of its rental revenue growth to emerge over the next six to 18 months.
Given the shortage of bed supply across Singapore, Centurion may be allowed to secure lease extensions across its Quick Built Dormitories (QBDs) which are scheduled to come to term in 2024 to 2025. Additional tendering opportunities include new QBDs previously used for Onboard Centres (OC) or Community Care Facilities (CRF).
Meanwhile, the analyst also notes that the Ministry of Health (MOH) is seeking an operator to retrofit and manage hostel-type accommodation for foreign healthcare workers at five different sites across Singapore. The hostels will adopt a co-living, hostel-type accommodation concept and could present a possible diversification revenue stream for Centurion, says Chan.
He believes Centurion&rsquo s valuations are attractive at just 5.5x core FY2023 price-to-earnings (P/E) and 0.49x price-to-book value (P/BV). The recent doubling of interim dividends to 1 cent represents a &ldquo decent&rdquo 4.7% annualized yield and could see further upside given its low payout of only 25%, adds Chan. His unchanged target price of 58 cents is pegged to a 7.5x core FY2023 P/E.
Centurion is also on track to delist from the Main Board of the Hong Kong Stock Exchange (HKEX) and focus its existing primary listing on the Singapore Exchange (SGX).
Based on the indicative timeline, the HKEX withdrawal is expected to happen around end-October and will provide cost savings of some $400,000 annually. With 8.26% of total shares held under HKSCC Nominees Limited as of March 3, the transfer of shares from Hong Kong to Singapore will increase the total number of shares to be traded on the SGX and hopefully improve share liquidity, Chan s
yes based on technicals
what about the market sentiment?
what about the market sentiment?
| ozone2002 ( Date: 16-Aug-2023 10:41) Posted: |
