In addition, Centurion is also the sponsor of Centurion Accommodation REIT (CAREIT), which provides a pipeline of assets to support REIT’s growth while advancing its asset-light strategy.
From the analysts’ perspective, following the listing of CAREIT, Centurion’s earnings framework has evolved into a diversified platform with three income streams.
They are: operating income from owned & operated assets, fee income from management services, and investment income from CAREIT units. The DBS analysts believe this will create a more capital-efficient, scalable and recurring-income business for Centurion.
“Centurion has been scaling its portfolio through acquisitions and developments across its core PBWA and PBSA segments in both existing and new markets, and into new living-sector segments, strengthening its growth runway while enhancing long-term income visibility and earnings resilience,” the team states.
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On the other hand, being CAREIT’s sponsor, Centurion stands to earn fees ranging from REIT management, property management to project management fees, which are expected to continue to grow in line with the REIT’s expanding portfolio.
Last October, Centurion secured a property management agreement (PMA) to manage an existing 548-bed dormitory on Jurong Island. This was followed by a second PMA in February to manage a 1,500-bed dormitory in the Gul Drive vicinity, to commence upon the property’s receipt of FEDA license.
With Centurion holding approximately 38.1% stake in CAREIT, the analysts foresee a steady stream of distributions for Centurion, supported by the REIT’s distribution policy of paying out 100% of its annual distributable income through FY2027.
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Meanwhile, Centurion has marked a key strategic expansion in April with the entry into key worker accommodation (KWA) segment through the acquisition of two operational assets in Western Australia. This is a resource-rich region Down Under which accounts for roughly two-thirds of the country’s mining production and over 90% of its iron ore output.
The region supports more than 13,000 jobs and attracts a diverse mix of workers across mining and extraction, construction, engineering, oil and gas operations, and energy infrastructure.
“Against this backdrop, the acquisition provides Centurion with exposure to structurally resilient, long-duration demand underpinned by large-scale resource projects and fly-in, fly-out (FIFO) workforce rotation cycles, which sustain recurring accommodation demand through continuous inbound and outbound labour flows,” the team predicts.
As such, the DBS team is initiating a “buy” call and a target price of $1.86 on Centurion. Their valuation is based on a sum-of-the-parts (SOTP) approach.
“We value Centurion’s stake in CAREIT based on our target price of $1.30 and applying a 12 times EV/EBITDA multiple to the management services platform, reflecting its recurring, asset-light earnings. Owned and operated assets, excluding CAREIT assets, are valued at their fair values, while Australia KWA assets are valued at a 10 times EV/EBITDA on projected earnings,” the team explains.
According to the analysts, this will yield a SOTP valuation of $2.07, translating to a target price of $1.86 after applying a 10% holding company discount.
As at 9.35am, shares of Centurion are trading 1 cent higher, or 0.71% up at $1.42.
