Centurion Corp - UOB Kay Hian 2015-11-11: 3Q15 Results Inline with Estimates

Centurion Corp - UOB Kay Hian 2015-11-11: 3Q15 Results Inline with Estimates CENTURION CORPORATION LIMITED OU8.SI 

CENTURION CORP (CENT SP) MAINTAIN BUY; 3Q15 RESULTS IN LINE WITH ESTIMATES 


VALUATION 

  • Maintain BUY but with a slightly lower DCF-based target price of S$0.66, as we trim our 2015-17 forecasts to account for the slow take-up rates at Westlite Woodlands. 

FINANCIAL RESULTS 


 Results in line with estimates. 

  • Centurion reported 9M15 net profit of S$26.6m, which forms 76% of our full-year forecast and 71% of consensus estimates. 
  • Despite a rise in revenue, 3Q15 net profit dipped 7% yoy due to higher financing cost for the UK student dormitories, Westlite Woodlands, and the MTN note issued in Jul 15. 
  • In addition, there were some seasonality effects due to the summer holidays in UK which started from mid-July – mid-September. As a result, Centurion recorded only one month of income with some additional summer income for its UK dormitories. 

INVESTMENT HIGHLIGHTS 


 A slow start for Westlite Woodlands. 

  • Westlite Woodlands, a permanent workers’ dormitory with 4,100 beds, was completed in Jul 15. With the slowdown in the marine and oil and gas sectors, Centurion expects a longer period of 6-12 months to fill up the dormitory instead of the historical 6 -9 months. 

 Prospects for Westlite Papan still promising. 

  • While we note that the upcoming 7,900 bed, Westlite Papan (51% owned) is also catered to the process industry (eg manufacturing of petrochemicals), we are upbeat on the potential take-up rate. To recall, Westlite Papan was awarded by the Association of Process Industry (ASPRI), a trade association representing the engineering service providers supporting the process industry. We believe the proximity of the dormitory to Jurong Island, and strong support expected from ASPRI members, will help underpin bed demand at this new dormitory when it becomes operational in mid-16. 

 Trim our profit forecasts by 1-3% for 2015-17 as we factor a slower ramp-up in the Westlite Woodlands dormitory. 

  • With no significant new supply being introduced into the industry landscape coupled with regulatory measures to promote the shift of workers’ accommodation to purpose-built dormitories, we believe the operating dynamics for the local workers’ dormitories market will slowly stabilise. 

 Maintain BUY with a slightly lower DCF-based target price of S$0.66. 

  • Despite our lower earnings forecast, Centurion is trading at 0.8x 2015F P/B and offers a highly recurring income stream at 8.6x 2016F PE. Current prices are also likely to be supported by Centurion’s share buy-backs at about S$0.42.


Loke Chunying UOB Kay Hian | http://research.uobkayhian.com/ 2015-11-11
UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 0.66 Down 0.69


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