Since the start of the year, Centurion shares have gained 83.33% to $1.76 as at Sept 10. They are up 340% since the beginning of 2024, when it was stuck at around 40 cents. In contrast, the Straits Times Index, which is trading at a record high, is up 14.4% year to date.
The current positivity about Centurion marks a sharp turnaround from the pandemic years, when the group made headlines for the wrong reasons as the disease spread through its dorms. The optics were made nastier as the group, distorted by revaluation gains, reported a whopping $100 million in FY2019 earnings, the full year before the pandemic.
CEO Kong Chee Min was compelled to point out that the net profit from core business operations was just $38.2 million and that measures were being put in place to help curb the spread.
In contrast, demand for Centurion’s dorms has returned, buoyed by the booming construction and marine industries, which require more workers.
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Unsurprisingly, analysts are all bullish on this stock, given news of the REIT and other drivers, including lower financing costs. RHB Bank Singapore, for example, has raised its target price four times year-to-date.
Speaking to The Edge Singapore following the EGM, Kong shared that shareholders were “very positive” as the REIT spin-off represented a new chapter of a multi-year growth story. From 5,300 beds in 2011, it now has around 70,000 beds. “The growth is still phenomenal, but to grow further, there’s so much we can leverage on our balance sheet,” he says.
When asked, Kong says both AUM and distribution per unit (DPU) growth are equally important. “AUM must be accretive to the REIT. That’s a given,” says Kong. He adds, “To align with shareholders, our fees are paid based on the percentage of distributable income and not based on the percentage of AUM. Therefore, we will try to increase distributable income to generate the fees.”
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The REIT would also be of interest to shareholders seeking yield, says Kong. In its Sept 11 prospectus, Centurion’s REIT will offer 262.16 million units for subscription at 88 cents each. The REIT has projected DPU yields of 7.47% and 8.11% for 2026 and 2027, respectively, for the enlarged portfolio of 15 assets. The REIT will have 16 cornerstone investors, including Lian Beng Group’s chairman, Ong Pang Aik.
As the sponsor holding approximately 45% of the REIT post-listing, Centurion’s shareholders are set to enjoy recurring income and fees from the REIT, as well as growth prospects for both the company and the REIT.
Upon listing, the REIT will seek out completed assets in Singapore and overseas for possible acquisition. For now, the focus is on familiar markets such as Singapore, the UK and Australia, where the REIT has already earmarked assets to acquire. “In terms of balance, I’d say it’ll still be more Singapore-centric rather than overseas,” says Kong.
Centurion will also look for greenfield and brownfield developments. Upon stabilisation, these will then be injected into the REIT. For now, all suitable assets have already been injected into the REIT, says Kong, given that the REIT can only take 10% of development risk. This means the REIT’s portfolio of assets is likely to be stable, have land titles, long lease tenures and mostly mature.
Besides the REIT, Centurion is expanding regionally and aims to double its capacity in Malaysia over the next five years. On Sept 2, it announced the RM110.8 million ($33.7 million) acquisition of Johor-based dorm operator, Harum Megah, which owns six dormitories with 7,197 beds. Centurion is “optimistic” and is “committed to deepening our presence in support of the Johor-Singapore Special Economic Zone and beyond”.
With its REIT and expansion plans in place, the market is rewarding Centurion for articulating its strategy clearly. However, the real test lies in execution.
