Centurion Corporation - DBS Research 2015-11-05: Workers' Dormitory Specialist

Centurion Corporation - DBS Research 2015-11-05: Workers' Dormitory Specialist CENTURION CORPORATION LIMITED OU8.SI 

Centurion Corporation - Workers' Dormitory Specialist 

Better things to come. 

  • We believe that Centurion’s purpose-built dormitory business is scalable, particularly in economic areas which rely heavily on foreign-sourced workers. Given its success in executing its aggressive bed growth strategy so far, we are optimistic about the Group’s long-term potential. 
  • Maintain BUY, TP S$0.59. 


Successfully executing aggressive growth strategy. 

  • Based on our estimates, net profit and EPS are forecasted to grow by a 2- year CAGR of 25% from FY14-16. 
  • Earnings will be driven by progressive completion of new purpose-built beds amounting to 80% of current bed count, as well as contribution from recently acquired student dormitory assets. 
  • First-mover advantage in purpose mover advantage in purpose mover advantage in purpose-built worker dormitories in built worker dormitories in Singapore and Malaysia. Centurion currently owns and/or operates close to 45k purpose built-foreign worker dormitory beds in Singapore (24k beds) and Malaysia (20k beds), making it one of the largest purpose-built dormitory operators in the region. 
  • With an additional c.35k beds in the pipeline, we expect a 16% CAGR in bed count from 2015-2017. 
  • The Group also owns a portfolio of student dormitory assets in Singapore, Australia and the UK, totalling c.2.8k beds. 

Valuation: 

  • At its current price, Centurion is trading at 9x FY15F PE and 8x FY16F PE, which is attractive in our view. 
  • We maintain our BUY call, with a DCF-backed TP of S$0.59. 


Key Risks to Our View: 


Downturn in the Singapore economy. 

  • While there is still an acute supply/demand imbalance in the provision of purpose-built dormitories for foreign work permit holders in Singapore, a sustained deterioration in Singapore’s economic outlook could adversely affect demand for labour and subsequently negatively impact rents.


Rachael TAN DBS Vickers | http://www.dbsvickers.com/ 2015-11-05
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 0.59 Same 0.59


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