RHB Group Research analyst Jarick Seet has upgraded his recommendation on Centurion Corp to “buy” from “neutral” following Centurion’s release of its results for the FY2021 ended December on Feb 24.
During the year, Centurion saw core PATMI increase 13% y-o-y to $46.5 million.
FY2021 revenue grew 11% y-o-y to $143 million mainly thanks to the four quick-build dormitories (QBDs) and two migrant worker onboarding centres (MWOCs) in Singapore, and a purpose-build worker accommodation (PBWA) facility in Selangor, Malaysia, notes Seet. Centurion’s UK student accommodation occupancy rate also rose to 82% in the 2HFY2021, from the 53% in the same period the year before.
In his report dated March 9, Seet says he expects Centurion’s numbers to “point to a continued recovery” in FY2022, as he raises his target price estimate to 38 cents from 36 cents.
“Centurion’s business has been resilient throughout the pandemic, and we expect its financial performance to improve further as Covid-19 infections stabilise and subside. As such, we upgrade our stock recommendation to ‘buy’, and expect PATMI to grow by 12% y-o-y this year,” writes Seet.
The analyst has also given Centurion an environmental, social and governance (ESG) score of 3, which is on par with the median score of the Singapore-listed stocks covered by the brokerage.
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In Singapore, Seet says Centurion’s new assets should further boost its revenue streams. At the same time, he expects occupancy rates to recover gradually from the recovery of migrant worker numbers in the construction, marine and processing industries.
In addition, he also expects rental rates from Centurion’s properties to remain resilient in FY2022.
In Malaysia, Seet notes that the demand for “good-quality and well-planned worker accommodations is expected to increase”.
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“We [also] expect its business in Malaysia to continue to fare well,” he adds.
Finally, Centurion’s UK student accommodation business is expected to see a further recovery in its occupancy rate, especially when the pandemic stabilises even more, says Seet.
Seet’s new target price represents an FY2022 yield of 7%.
UOB Kay Hian analyst Adrian Loh has kept "buy" on Centurion with a higher target price of 45 cents from 43 cents previously.
In his March 10 report, Loh estimates that the company is likely to continue experiencing a recovery post the Covid-19 peak, following its strong FY2021 results, as well as its "robust" sequential recovery.
"Looking back to the start of Covid-19 in 1HFY2020, the company’s revenue and gross profit have clearly troughed in 2HFY2020. In our view, Centurion’s profitability and business prospects should continue its pace of recovery in 2022," he writes.
During the FY2021, Centurion had declared a final dividend of 0.5 cent per share. To Loh, this is a good sign and a "welcome return to dividend payments" as the company had suspended its dividend due to the financial effects of Covid-19.
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In addition to his higher target price, Loh has also upped his net profit forecasts for the FY2022 and FY2023 by 3% and 8% respectively "on the back of greater conviction in the company’s business recovery".
"Our earnings changes incorporate an increase in occupancy rate for Singapore and the UK by 2 percentage points to 88% and 85% respectively and a 20% decline in rental rates for Australian PBSA (vs pre-Covid-19 levels) due to increased competition as the industry gets back on its feet," says Loh. "However, we highlight that there may be changes coming in the form of new government specifications for PBWA assets in Singapore and this may necessitate some downtime as Centurion adapts to these changes."
A full resumption of domestic and international flights, as well as the faster-than-expected easing of Covid-19 restrictions in Centurion's key countries are key catalysts to the company's performance, says Loh.
As at 1.56pm, shares in Centurion are trading flat at 33.5 cents.
