The REIT offers "unmatched growth" with an estimated 15% CAGR in distributable income from FY2025 to FY2027, driven by a 35% growth in beds.
Upside is seen to come from stronger-than-expected rental reversions in its portfolio of workers' dorms, where an estimated increase of 5% will translate into a 5% lift in distribution per unit.
Wong and Tan point out that the REIT, with a portfolio of 15 assets worth $2.1 billion, provides direct exposure to Singapore’s resilient purpose-built worker accommodation (PBWA) sector, described as "structurally tight".
"High historical occupancy of more than 97% and short one-year leases offer defensive income visibility with the ability to capture organic growth," state the analysts.
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The projected 15% CAGR in distributable income these two years is to be driven by an expansion in capacity that includes new acquisitions, specifically, Epiisod Macquarie Park.
With a gearing of just 31%, which gives a debt headroom of $561 million based on a 45% limit, there's plenty of flexibility to drive medium-term growth via acquisitions from the sponsor's pipeline or via redevelopment of existing assets, according to them.
In addition, the DBS analysts point out that CAREIT will be the only S-REIT to fully lock in current dovish interest costs, with debt costs to come in around 50bps lower at 3.50% from IPO underwriting.
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"Reversions could surprise on the upside which we view as the real delta for distribution per unit," state Wong and Tan.
Their $1.30 target price has factored in FY2026 DPU of 6.9 cents and 7.63 cents for FY2027.
Centurion Accommodation REIT units changed hands at $1.06 as at 11.14 am, up 1.92% for the day and a growth of more than 20% from its IPO price.
