Centurion Corporation (CENT SP) - UOB Kay Hian 2016-10-14: Solid Proxy For Foreign Workers’ And Students’ Accommodation

CENTURION CORPORATION LIMITED OU8.SI

Centurion Corporation (CENT SP) - Solid Proxy For Foreign Workers’ And Students’ Accommodation

Centurion Corp owns, develops and manages quality workers’ accommodation under the Westlite brand.
The group also owns student accommodation assets in the UK, Australia and Singapore.

The group enjoys resilient and stable revenue from its purpose-built workers’ and student accommodation business.
Centurion has a solid portfolio of 22 operational accommodation assets totaling over 64,408 beds in Singapore, Malaysia, Australia and the UK.
Of its total accommodation assets, 96% are for workers and the remaining 4% are for students.

Despite fears of an oversupply, the potential expiry of an estimate 22,800 beds in 2016, 37,000 beds in 2017 and 13,000 beds in 2018 could see demand/supply reaching equilibrium in Singapore (total supply estimated at 272,000 beds as at end-16).
In addition, selected government policies could see a further shift in foreign workers towards purpose-built workers’ accommodation. One example is that from 1 Jan 17, non-Malaysians from the manufacturing sector will not be allowed to rent an entire HDB flat.
Rental rates for workers’ accommodation have also stabilised and we estimate rentals at S$280-300/month.

Centurion continues to enjoy healthy overall occupancy rates (about 95% in Singapore excluding ASPRI-Westlite and 61% in Malaysia) and continues to outperform peers.
In addition, its student accommodation segment has proven to be resilient with high occupancies and positive rental revisions.

The group is expanding through organic and new acquisitions.
In 2016, its Senai II opened in January and its ASPRI-Westlite Papan achieved TOP in May. Completing its organic growth was the acquisition of four new UK student accommodation assets in July.
Looking ahead, we understand that the group has a pipeline of 11,100 beds (or 17% of its existing assets) until 2018. Management has been steadily growing assets. As an indication, the group will see its assets grow from 5,300 beds in 2011 to an estimated 64,408 beds by end-16.

As at 2Q16, its net gearing was 54% (the group defines this as net borrowings divided by total capital). Interest cover was strong at 3.4x and its average long-term debt-to-maturity was a manageable 11 years.
Based on consensus forecasts, the stock is trading at 6.8x 2017F PE and 2017F dividend yield of 3.9%.

Andrew Chow CFA UOB Kay Hian | http://research.uobkayhian.com/ 2016-10-14

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