"We believe this will support demand for foreign worker beds and dormitory bed rates," Yeo writes in his April 29 report.
The Building & Construction Authority (BCA) previously projected that construction demand and contracts awarded will range between $47 billion and $53 billion in 2025. The demand will be backed by projects including upgrading works for public housing, Changi Airport Terminal 5, Marina Bay Sands expansion, construction of high-specification industrial buildings, other educational and healthcare developments, the Mass Rapid Transit (MRT) network, Woodlands Checkpoint extension and Tuas Port, Yeo notes.
"BCA has forecasted total construction demand of $39 billion - $46 billion each year from 2026 to 2029. New Tengah and Seletar MRT lines could also be developed in the longer term," he adds.
To this end, the analyst has increased his earnings estimates for FY2025 and FY2026 by 2% each with higher bed capacity from Centurion's new dormitory in Ubi, as well as the ramp up of beds in its China build-to-rent apartment project.
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"Along with the higher demand and bed rate rental reversions, we expect FY2024 - FY2027 earnings to grow at a compound annual growth rate (CAGR) of 6.7%," says Yeo.
With the continued rental reversions, the analyst adds that Centurion's gross profit margin (GPM) going forward will outperform its GPM in FY2024.
In addition to his higher target price and earnings estimates, Yeo has increased his GPM assumptions to 78%.
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His new target price is based on rolled-over estimates to a blended P/E from FY2025 to FY2026. Yeo's target P/E is now at 10 times from 9 times, or near 1 standard deviation (s.d.) of its mean.
The analyst is also positive on the counter as its business operations will have minimal impact from the US tariffs.
"Centurion runs worker and student dormitory property assets for rent in Australia, the UK, Singapore, Malaysia, China and Hong Kong. As such, it does not have direct exposure to US tariffs," he points out.
"While Centurion derived 0.16% of revenue from the US market in FY2024, its Centurion US Student Housing Fund reached its term in November 2024, with the properties currently being disposed of. Therefore, we believe Centurion will have minimal exposure to the US market," he adds.
Shares in Centurion were trading 1 cent higher or 0.82% up at $1.23 before the mid-day break.
