SINGAPORE (Aug 11): Maybank Kim Eng is maintaining its “hold” call on Centurion Corp as its Westlite Tuas’ lease extension will end next January and failure to renew the lease can significantly dray the group’s EPS.
Westlite Tuas contributes a chunky 20% to the group’s revenue.
The group’s newer Singapore asset, Westlite Papan, managed to hit 99% occupancy, while its student accommodations also reported 94% occupancy rate.
See: Centurion posts 72% rise in 2Q earnings to $14.5 mil
In a Thursday report, analyst John Cheong mentions that these along with the expected completion of Dwell Adelaide and RMIT Village’s extension in 2018 as well as the expected completion of its US student accommodations in Sept 2017, the target has been raised from 41 cents to 55 cents.
In 2016, Singapore saw a 2% y-o-y decline in foreign workers with permits, but this did not significantly affect Centurion as the group posted 92% occupancy rate for its five worker-accommodation assets.
Due to leases expired in 2016 and expiring this year as well as the absence of new land released by the government for purpose-built dormitories for the past two to three years, the management believes that bed-supply will remain limited.
“Rental rate per bed has stabilised but remain flat,” says Cheong.
Fortunately for the group’s 10 operating assets in UK and Australia, its occupancy was kept at 94% on the back of stable demand.
In 2Q17, the group announced two development projects in Australia – Dwell Adelaide and RMIT Village – that is expected to be completed at end 2018.
In addition, the group is also acquiring a 30% stake in five student-accommodation assets in four US states.
See: Centurion to acquire dorms near Yale for US$70 mil
The analyst estimates that this acquisition will add $2 million to the group’s annual earnings.
Shares in Centurion are trading at 54 cents as at 4.08pm.
