Chan En Jie of Lim & Tan has upgraded his call on Centurion Corp from "accumulate on weakness" to "accumulate" following its FY2024 results that came in "slightly" above his expectations.
With prospects of earnings growth, plus potential catalysts from asset monetisation, Chan has raised his target price for the stock from 83 cents to $1.20.
The dormitory operator's core FY2024 earnings for the year ended Dec 31 2024 was 107% of what Chan was expecting. Thanks to higher rental and occupancy rates, revenue of $253.6 million was also 106% of what he had projected.
The company plans to pay a final dividend of 2 cents, which will bring the full-year payout to 3.5 cents, versus 2.5 cents paid for FY2023.
As Chan indicated in his March 12 note, Centurion has a "healthy" pipeline of 9,700 new beds in the coming two years, equivalent to 14% of total capacity now.
"Strong growth in construction demand over the next few years in key market Singapore will be favourable for dormitory operators like Centurion," says Chan, referring to the business segment that generated 69% of the company's turnover.
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Furthermore, Centurion Corp has flagged that it has appointed bankers for a possible spin-off listing of its assets into a REIT, potentially unlocking value through capital recycling of mature assets.
One of the two controlling shareholders, Han Seng Juan, who holds the non-executive director and joint chairman role, has paid 98 cents per share to buy 600,000 shares after the results announcement.
To Chan, this is a suggestion of Han's continued confidence in the company's outlook.
At current levels, valuations remain attractive at 7.9x forward P/E and 0.73x P/B.
Chan has raised his target price valuation multiple from 7.1x current year FY2025 earnings to 9.5x.
As at 2.29 pm, Centurion shares are up 4% to $1.04.
