Centurion Corporation Limited - Phillip Securities 2019-02-14: Opportunities In Penang


Centurion Corporation Limited - Opportunities In Penang

  • We were hosted by CENTURION CORPORATION LIMITED (SGX:OU8) to attend the completion ceremony of their Westlite Bukit Minyak facility – Penang’s maiden worker dormitory facility – on 29 January 2019.
  • Westlite Bukit Minyak is the first of eight Centralised Accomondation Transit (CAT), also known as Purpose-Built Workers Accommodations (PBWA), to be built in Penang.
  • We also visited the two industrial parks in Batu Kawan, which is home to the manufacturing arms of several MNCs in the medical devices, automobile and electronics and engineering (E&E) sectors.

Company Background

  • CENTURION CORPORATION LIMITED (SGX:OU8) owns, develops and manages purpose-built worker accommodations in Singapore and Malaysia, and student accommodations in Singapore, Australia, United Kingdom and the United States.
  • Initially listed on the SGX Mainboard in 1995 as an audio cassette tape and optical disc manufacturer, Centurion pivoted into the accommodation business via a reverse takeover in 2011. Worker and student accommodations account for c.73% and c.26% of their revenue respectively, with c.71% of revenue stemming from Singapore.

Site Visit Highlights

Government support and policies in favour of worker dormitories

  • Seven more CATs to be built – two on Penang Island and five on the mainland. Currently six projects have been approved and one still under review.
  • The Malaysia Government is drafting an amendment to the Employment Act 1955 (Act 265) to require employers to provide adequate housing for foreign workers in all sectors, as well as amendments to the Housing Development (Control and Licensing) Act 1966 to outlaw the rental of low-cost (LC) and low-medium cost (LMC) units to foreign workers.

Established track record in Malaysia

  • Centurion has 15 years of experience building and operating PBWAs, and currently manages 11 PBWAs totalling 56,400 beds across Singapore (26,100) and Malaysia (30,300).
  • Westlite Bukit Minyak is the seventh PBWA in Malaysia. The other six PBWAs are located in Johor.

Captive demand from medical device, automobile and E&E manufacturers

  • Workforce of 97,000 registered foreign workers in Penang currently housed in LC and LMC residential accommodations meant for Malaysians, with c.20 workers sharing one unit
  • Impending amendments to laws that mandate housing of foreign workers in dormitories, low supply of completed dormitories, and new factories under construction will drive demand for worker accommodations.
  • Bukit Minyak CAT aims to target companies located in the Batu Kawan Industrial Park such as Flextron, Inari, Western Digital, Ibiden and Hotayi.

Investment Actions

  • No stock rating or price target provided, as we do not have coverage on Centurion.


  • The Singapore PBWA market is an oligopolistic one shared by Centurion, MES, Averic and Capital Development. Figure 1 in the PDF report attached breaks down the number of beds owned by each developer-operator.

Westlite Bukit Minyak CAT

  • Bukit Minyak CAT is the very first PBWA in Penang, and Centurion’s seventh workers accommodation in Malaysia, with the other six located in Johor. This asset was built on privately-sourced freehold land acquired in 2014. The facility has a gross floor area (GFA) of 17,900sqm and comprises of three 11-story block of dormitories totalling c.6,600 beds.
  • The facility includes a supermarket, barber, gym and sports facilities, recreational facilities as well as a laundry room. This facility costs RM72.3mn (S$23.8mn) and is located near major highways leading to Bukit Minyak Industrial Park, the Science Park, and the Batu Kawan Industrial Park. Bukit Minyak CAT is expected to receive its first residence in mid-Feb 2019. Current committed occupancy stands at 30% and is expected to ramp up to 60% by end- June 2019.
  • Average rent per bed in Penang is RM130 per month, translating to c.RM10.3mn (S$3.2mn) yearly revenue, assuming 95% occupancy. For context, the revenue for 9 months-ended September 2018 was S$88.7mn (post Westlite Tuas closure).

Natalie Ong Phillip Securities Research | https://www.stocksbnb.com/ 2019-02-14
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998 SAME 99998