DBS Group Research analysts Woon Bing Yong and Lee Keng Ling have kept a “hold” rating on Centurion Corporation with an increased target price to 42 cents from 38 cents. DBS will also be suspending coverage on the stock as it reallocates research resources.
In light of increased global opening as restrictions due to the Covid-19 pandemic ease, Singapore’s purpose-built worker accommodation (PBWA) occupancies are expected to improve progressively over FY2022 ending December 2022 and FY2023. According to a senior government official, this comes at a point where the foreign labour crunch is targeted to be resolved in the next few months as well.
At the same time, a new academic year coupled with the relaxation of border restrictions in Australia and the UK should mark a point of recovery for student arrivals and thereby purpose built student accommodation (PBSA) occupancies, the analysts expect.
The analysts foresee Centurion to return as a dividend play, underpinned by improved occupancies across its PBSA and PBWA segments. FY2022 and FY2023 dividend per share (DPS) are projected to come in at 1.5 cents and 2 cents respectively, representing a yield of 4.2% and 5.6% respectively.
On the other hand, the analysts are wary about the group’s capex moving forward due to new regulations for workers’ dormitories set by the government, which includes an expected reduction in capacity at the group’s worker dorms.
Although the analysts claiming that early information resulting in rental rates steady, the group is expected to incur additional capex to adapt the dormitories to the new standards. Instead of an upfront lump sum capex, Woon and Ling believe that this will likely be something that will take place over a period of time.
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Some key risks the analysts note include unfavourable changes in regulatory environment, foreign exchange volatility, sustained deterioration in economic outlook for Singapore and Malaysia affecting foreign worker demand and possible re-implementation of border restrictions.
As at 3.29pm, shares in Centurion are trading at 1 cent higher and 2.82% higher at 36 cents at a FY2022 P/B ratio of 0.4x and 4.2% dividend yield.
