RHB Bank Singapore analyst Alfie Yeo has kept his “buy” call on Centurion Corporation with a higher target price of $1.16 from $1.06, as he sees several positive factors for the company going ahead.
For one, Centurion remains “well positioned” to see better rental rates in Singapore due to the shortage of dormitories.
“Purpose-built workers accommodation (PBWA) bed rates in Singapore have continued to be robust and due to the demand-supply situation, we see ongoing upward rental reversions lifting average bed rates going forward,” Yeo writes in his Feb 3 report.
Due to the strong demand seen, the analyst has increased his bed rate assumptions for Singapore PBWAs for FY2025 to FY2026 from to $450 - $500 per bed per month from $400 - $450 previously. Current market rates run up to $600 per bed, Yeo notes. As a result of the increased rate assumptions, the analyst has raised his FY2025 to FY2026 earnings estimates by 9% per year.
Yeo also sees Centurion’s longer-term growth prospects supported by its overseas properties. The company entered the Hong Kong PBSA market by securing a master lease in July 2024 for a property in Sheung Shui in Hong Kong’s New Territories. The lease is for a term of five years and 11 months with an option to extend for another five years. According to Centurion’s investor presentation dated Nov 5, 2024, the property was turned into a PBWA for non-local workers in various sectors including food and beverage (F&B) and was progressively operational from November 2024.
“Drivers include rising foreign worker demand in the Enhanced Supplementary Labour Scheme (ESLS), which received 66,230 worker import applications, especially for the F&B sector,” Yeo notes.
Other upsides include Centurion’s revenue for the 9MFY2024 being “on track”. 9MFY2024 revenue rose by 25% y-o-y to $187 million. The company’s occupancy rate of its purpose-built student accommodation (PBSA) assets rose by eight percentage points y-o-y to 98% as at 9MFY2024. Its PBWA occupancy rate dipped by one percentage point y-o-y to 95% during the same period.
“Drivers of revenue growth included positive rental reversion and strong occupancy rates across its Singapore PBWA, as well as in its PBSA facilities in Australia and the UK,” Yeo writes.
Another plus is Centurion’s potential REIT listing, which involves some of its PBSA and PBWA assets. Centurion announced its intention to establish a REIT on Jan 6 although the details of the listing have yet to be finalised.
See also: Time to switch into S-REITs, says CGSI, adding Keppel DC REIT, UOL to top picks
“The intention of the REIT is to deliver more growth, be asset-light and allow the REIT to carry the assets on its books,” says Yeo. “The listco should eventually develop, acquire and manage assets, and acquire leases while earning fee income, including asset management fees.”
Shares in Centurion closed 1 cent higher or 1.01% up at $1 on Feb 4.
