Company Update: Centurion Corp Ltd (CENT SP/OU8.SI)
Company Update: 27 September 2024
Strong revenue growth and strategic expansion.
- Stronger than anticipated revenue growth. Centurion Corporation reported a 27% YoY growth in total revenue for 1H24, increasing from S$97.9mn to S$124.4mn. This robust performance was driven by high financial occupancy in key markets like Singapore, the UK, and Australia, along with positive rental revisions across all regions. The total asset under management reached S$2.1bn with 66,495 operational beds across 32 properties in 14 cities globally.
Inorganic growth through geographical expansion
Centurion entered China’s Purpose-Built Student Accommodation (PBSA) market with two master-leased properties in Kowloon, Hong Kong. These properties will be refurbished to cater to students, with operations expected by September 2024. Additionally, Centurion has secured a third master lease for a larger Purpose-Built Workers Accommodation (PBWA) in the New Territories, expected to open in November 2024.
1H24 financials update: Boost in occupancy and rental rates
Revenue increased 27% YoY to S$124.4mn, supported by improvements in financial occupancy, which reached 95% for PBWA and 98% for PBSA, compared to 96% and 89%, respectively, in 1H23. Although there was a slight decline in PBWA occupancy due to capacity expansions in Malaysia, this was offset by improved rental rates across all regions.
Valuation & Action
We maintain our OUTPERFORM rating with an increased target price of S$0.85, based on a discounted cash flow (DCF) analysis using a terminal growth rate of 2.0% and a weighted average cost of capital (WACC)
of 5.1%. Centurion’s expansion plans and continued revenue growth from upward rental revisions are expected to drive short-term gains, with revenue normalizing in the long term as rental rates stabilize. The rental rate revisions in 1H24 are expected to continue positively influencing 2H24 revenue.
Risks
Interest rates remain higher for longer; profit margins continue to be under pressure due to higher operating costs and widened FX losses due to the strengthening of SGD against other currencies.
