The analyst, who has kept his “buy” call on Centurion, believes that the company’s business model of purpose-built workers’ accommodation (PBWA) and purpose-built students’ accommodation (PBSA) will insulate its revenues and profitability from externally caused shocks brought on by the tariffs.
Loh says Centurion’s PBWA assets are likely to benefit from the robust construction demand in Singapore’s public and private sectors. In FY2024, the company reported $124 million in revenue, of which nearly 70% came from Singapore and its PBWA assets.
“Construction activity from both the public and private sectors remains high with key multi-year projects such as the Marina Bay Sands expansion (worth $10.7 billion), Resorts World Sentosa expansion ($6.8 billion), Changi Airport Terminal 5 ($11 billion), and the 21.5km North-South Corridor linking Woodlands to the western end of the East Coast Parkway ($7.5 billion),” the analyst notes.
The proposed Johor-Singapore Special Economic Zone could also lead to additional demand for Centurion’s PBWA assets in Malaysia, which made up 8% of the company’s FY2024 revenue.
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“At present, we forecast 870 new beds will be completed by end-2025, with contributions only starting in 2026. In prior conversations with management, they were clearly bullish on the PBWA sector in Malaysia. Thus, we should expect potential acquisition announcements in the near to medium term,” Loh writes.
The analyst adds that he remains bullish on Centurion’s PBWA business because meaningful competition is only likely to happen in the near to medium term, given that it takes 24 months or more for a potential competitor to tender for and build a PBWA facility.
At the same time, education expenditures remain inelastic, which will impact Centurion’s PBSA assets in Australia and the UK.
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At its present share price levels, Centurion, which is trading at an FY2025 P/E of 9.5 times and P/B of 0.8 times, is “inexpensive” in Loh’s view.
The analyst’s higher P/E-based target price is due to a higher target P/E multiple of 10.6 times, which is one standard deviation (s.d.) over Centurion’s long-term average P/E multiple of 6.9 times. The figure excludes FY2019 when the business was affected by Covid-19.
“We highlight that our target P/E multiple is applied to the average of our FY2025 and FY2026 earnings per share (EPS) estimates to account for the earnings growth from its projects in FY2026,” says Loh. “We believe that this target P/E multiple is undemanding given the company’s earnings growth over the next two years.”
The analyst’s forecast payout ratio for FY2025 remains unchanged at 30%. This implies an estimated dividend of 3.5 cents per share or a yield of 3.1% based on Centurion’s closing share price of $1.12 as of April 11.
Another factor in Centurion’s favour is its strengthening balance sheet. As of Dec 31, 2024, Centurion’s net debt fell by 8% to $534 million compared to a year ago, resulting in a lower Net debt/Equity of 0.3 times, down from FY2023’s 0.4 times.
“In our view, its average long-term debt maturity profile remains comfortable at six years while interest coverage ratio improved to 4.4 times (end-2023: 3.6 times),” Loh writes.
The company’s proposed REIT spin-off of its PBWA and PBSA assets and subsequent dividend in specie is a share price catalyst.
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Other catalysts include successful capital recycling efforts or capacity expansions involving joint ventures, which could result in a more asset-light business model that requires less capital intensity.
In her separate report on April 11, Alyssa Tee of KGI Securities kept her “outperform” call and raised her target price for Centurion Corp to $1.38 from 85 cents, given its robust expansion pipeline and potential REIT listing.
“This could unlock asset value, enhance capital recycling, and deliver stable income for shareholders via a potential dividend-in-specie,” says Tee in her April 11 note.
Citing the company’s FY2024 numbers, Tee sees a long-term growth trajectory backed by continued expansion into the build-to-rent segment and also disciplined financial management.
Tee notes that Centurion has shown prudence in managing its debt. In FY2024, it reduced its borrowings from $657.4 million to $623.5 million, thereby lowering its net gearing ratio from 38% to 29%.
It ended FY2024 with a healthy cash position of $89 million and access to $150.4 million in unutilised committed credit facilities, of which $133.9 million remains available beyond the next 12 months.
Tee says: “Centurion’s long-term bank financing model supports its income-generating and development assets, with an average debt maturity of six years, helping to mitigate refinancing risk.”
Tee also points out that a proposed share buyback mandate of up to 10% of the total share base further underscores management’s confidence in the group’s intrinsic value and ability to deliver earnings accretive returns.
She agrees that heightened global trade tensions and potential tariff escalations may weigh on Singapore’s growth outlook in 2025. Still, Centurion’s diversified portfolio, strong fundamentals, and prudent capital strategy should help cushion against volatility and support long-term shareholder value.
Her higher target price is derived from a discounted cash flow analysis using a terminal growth rate of 2% and a weighted average cost of capital of 5%.
The potential upside from a successful REIT listing has not been taken into account, which, if so, could serve as an additional catalyst for re-rating.
