Centurion Corp (CENT SP) - Maybank Kim Eng 2016-11-15: Stable Occupancy Rate

CENTURION CORPORATION LIMITED OU8.SI

Centurion Corp (CENT SP) - Stable Occupancy Rate

3Q16 earnings were in line with our expectation and grew 6% YoY.
9M16 core earnings met 72% of our FY16E.
Occupancy rate across all the established dormitories in Singapore remain stable at around 95%, while four-month-old ASPRI-Westlite Papan has reached 40%. Bed rates also remain stable.
Malaysia recorded mild improvement as the government relaxed the hiring freeze of foreign workers. Also, student dormitories in UK and Australia remain robust.

Due to the unsuccessful appeal over bed capacity in Westlite Toh Guan, c.800 beds have to be reduced. We therefore cut FY17-18E EPS and our DCF-based TP by 3% to SGD0.36 (WACC 6.8%, LTG 1.5%). Maintain HOLD.

3Q16 workers’ accommodation segment posted 18% YoY revenue growth, mainly lifted by two new dormitories in Singapore:
1. Westlite Woodlands started in Jul 2015 (76% occ. rate) and
2. ASPRI-Westlite Papan started in May 2016 (c.40% occ. rate).
In Malaysia, revenue declined slightly YoY due to lower occupancy rates of > 65% in 3Q16 (including Westlite Senai II, which commenced operations in Jan 2016); however, occupancy rates improved QoQ, from 61% in 2Q16.

Student accommodation business continued to grow and contributed 23% of total revenue in 3Q16. The growth was largely attributed to:
1. CSL Selegie, started in Oct 2015
2. four newly acquired student accommodation assets in UK and
3. positive rental reversions from business in Australia and the United Kingdom.

Outlook in the workers accommodation sector in Singapore remains unexciting, on lower foreign workers growth and ample supply of beds.
On the other hand, the student dormitory segment should remain stable.
Maintain HOLD with lowered DCF based TP of SGD0.36.

John Cheong CFA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-11-15

Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 0.360 Down 0.370