KGI Singapore Research

Singapore's leading broker offering Futures, FX, Equities and Wealth Management.

Company Update: Centurion Corp Ltd (CENT SP/OU8.SI)

Company Update: 13 October 2023

Centuries of Growth

  • We assume coverage of Centurion with an Outperform recommendation. Our S$0.56 target price is based on a DCF valuation. Centurion showed an 8% YoY growth in 1H23 revenue to S$97.9mn due to strong occupancies and positive rental revisions across all the Purpose-Built Workers Accommodations (PBWAs) and Purpose-Built Student Accommodations (PBSAs).
  • Despite this rise in YoY revenue, we anticipate revenue figures to show a larger YoY increase in 2H23, as we expect rental revisions to be better reflected in the rental collected in the second half of the year.

Occupancy recovery

With migrant workers returning to Singapore, post-covid, we have witnessed a significant inflow of foreign workers to complete construction on buildings that were halted due to the pandemic. The sudden wave of workers has led to a strong incline in demand for housing. However, due to the limited land available in Singapore, there is a limited number of beds available for rent to such companies that need to hire workers from overseas. Hence, there has been a price revision for such dormitories due to the shortage of available beds.

Student dormitory revival

International and local students have once again flocked to the tertiary schools in the United Kingdom and Australia to continue their education. With physical classes resumed, students are again on the hunt for accommodations that are in good locations, look good and value for money. However, due to the shortage of such properties out for rent, there has also been a surplus in demand for such properties, and hence the sudden increase in prices for logging.

Valuation & Action

We initiate an Outperform recommendation with a TP of S$0.56, based on a Discounted Cash Flow (DCF), with a terminal growth rate of 2.0% and a WACC of 5.2%. With expansion plans underway, the winning of a new PBWA alongside higher rental reversions seen in its multiple geographical PBWAs and PBSAs we anticipate higher revenue growth figures in the second half of the year.

Risks

Margin pressure due to competition and lower-than-expected new order wins.

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