Due to increased rental and occupancy rates at its dormitories, Centurion Corporation ’s revenue for the financial year ended Dec 31, 2024, rose by 22% y-o-y to $253.6 million. Boosted by fair value gains, earnings surged 125% y-o-y to $344.8 million. If this item was excluded, net profit attributed to equity holders rose by 43% y-o-y to $99.3 million. Centurion plans to pay a final dividend of 2 cents per share, bringing the FY2024 total to 3.5 cents versus 2.5 cents in FY2023.
With a bigger volume of construction projects, Centurion expects the demand-supply dynamics of its so-called purpose-built workers’ accommodation to be “very positive”. The government projects total construction demand for 2025 to range between $47 billion and $53 billion, up from $44.2 billion in 2024 and $33.8 billion in 2023.
Under local requirements, work permit holders employed in the construction, marine and process sectors must be housed in approved dormitories. For Centurion, this is an addressable market of some 443,000 workers.
At the same time, another 400,000 work permit holders are employed in other sectors. They can be housed in alternative accommodations such as flats, apartments and other converted spaces. According to David Phey, Centurion’s head of corporate communications, workers’ dorms are still preferred, especially if rental rates for these alternative spaces are high.
Centurion believes that with 244,000 beds in purpose-built dorms and another 190,000 beds in other spaces, demand can now be met. However, some 9,000 beds will be taken out of the supply in 2Q2025 as the lease to operate one of the larger dorms by another competitor won’t be renewed.
Centurion anticipates a further supply squeeze by 2027, as dorms must meet upgraded interim standards under the Ministry of Manpower’s Dormitory Transition Scheme (DTS).
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As Centurion is redeveloping its dorms and adding beds ahead of the transition scheme, these dorms, particularly Westlite Toh Guan and Westlite Mandai, will serve as “swing sites” when shifts are required. Its quick-build dormitories (QBDs) already meet the new dormitory specifications. Thus, Centurion doesn’t expect its revenue to be interrupted by the DTS.
With the government stepping in to manage supply, Centurion expects rental rate growth to slow compared to the past 18 months. Even then, its revenue is expected to grow as most of its leases are on one-year terms and can thus be renewed at prevailing rates without any cap on the pace of rental reversion, Phey notes.
In Malaysia, Centurion plans to develop some 7,000 beds in Nusajaya, Iskandar, and Johor. Its nascent presence in Hong Kong enjoys “good growing demand” from workers from the Mainland.
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Centurion has a portfolio of student accommodations in Australia, the UK and the US. Similar to the workers’ dorm, Centurion enjoyed both higher occupancy and rental rates, as this is an asset class with strong demand and short supply, whetting a bigger appetite from institutional investors, says Phey.
Universities in the UK are growing their international student numbers, which will lead to more demand. In Australia, there is also an ongoing shortage of beds. As such, Centurion wants to expand its bed count in Melbourne and Sydney, he adds. The company is also looking for related opportunities in Hong Kong, which is keen to be an international post-secondary education hub.
Spin-off REIT listing
Centurion is eyeing expansion in its so-called build-to-rent (BTR) accommodation as well. It has an agreement with a local partner in Xiamen to provide housing for working professionals. “The expansion aligns with China's regulatory push to increase bank financing for rental housing projects, supporting the growth of affordable and commercial rental supply across major cities,” says Centurion in its presentation.
In January, Centurion announced plans to spin off a REIT — 10 years after it had wanted to do so. When asked, CEO Kong Chee Min felt that now is “the right time to do so.” As of Dec 31, 2024, Centurion has $2.5 billion worth of assets under management (AUM) with 69,929 beds and 37 properties in six countries.
Centurion indicates the REIT will be of a “reasonable size and will be a reflection of the company’s significant asset growth since 2015. “While the type of asset that Centurion is able to offer is a key differentiating factor, we point to the fact that the Singapore REIT industry is extremely crowded, and a mid-sized REIT could struggle for investors’ attention,” says Adrian Loh of UOB Kay Hian in his March 6 note.
Nonetheless, Loh has not only maintained his “buy” call on Centurion but has also raised his target price to $1.16 from $1.11, using a higher valuation of 8.7 times from 6.9 times.
Alfie Yeo of RHB Bank Singapore is similarly bullish, indicating a "buy" call and $1.17 target price in his March 5 note. "We turn more positive in our FY2025 to FY2026 outlook due to its higher earnings base of FY2024 and increased bed capacity.”
