On a pro forma basis, if the deal was completed on Jan 1 2025, it would add 5% to its earnings per share - a "modest but meaningful" - given how the size is equivalent to around 3% of the market cap.
"In addition, we view the implied 2025 PE acquisition multiple of 7.1x as conservative relative to CENT’s existing asset base and its 2027E PE of 10.9x," adds Loh.
The asset is in the town of Karratha, where some 46,000 mining workers rotate through monthly. The town has a capacity of 13,000 beds for these so-called "fly in, fly out" miners but "severe" shortage remains during peak periods.
"Against this backdrop, we view Centurion's Karratha asset not as a cyclical bet on commodity prices but instead a toll-road on the structural, non-discretionary accommodation needs of a workforce that sustains one of the world’s most irreplaceable resource export corridors," says Loh.
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The way Loh sees it, this acquisition is a "logical extension" in what is seen as a "strong" business segment. The "structural similarities" are "compelling" as workers dormitories in Australia and Singapore are seen as asset-heavy, operationally intensive, have long duration demand driven by institutional rather than retail clients.
Over time, this asset, according to Loh, will likely be injected into Centurion Accommodation REIT, which UOB Kay Hian has a "buy" rating and $1.51 target price.
For now, Loh is keeping his earnings forecast for the current FY2026 to FY2028. His target price of $1.90 is based on 12.4x earnings, which is 1sd above Centurion's long term average PE, excluding the COVID-19-affected years of 2019-23.
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"We believe that this target PE multiple is undemanding given the company’s earnings growth over the next two years.
"With expanding bed capacity, structurally undersupplied living sectors and improved leverage metrics, earnings visibility for 2026-27 appears strong, in our view," he adds.
Centurion Corp shares held steady at $1.66 as at 4.02 pm. It is up 21.17% year to date.
