Centurion Corp - RHB Invest 2019-05-14: 7,201 New Beds Added In 1Q19


Centurion Corp - 7,201 New Beds Added In 1Q19

  • Maintain NEUTRAL and DCF-backed Target Price of SGD0.41, 0% downside, 5% yield.
  • CENTURION CORPORATION LIMITED (SGX:OU8)'s 1Q19 revenue rose 4% y-o-y to SGD31.3m mainly due to the revenue contribution from dwell Princess Street and better rental rate from UK assets.
  • However, PATMI was impacted by the associated cost incurred in relation to the new operating assets. As a result, core PATMI decreased 14% y-o-y to SGD7.9m.

New operating assets added in 1Q19.

  • Centurion Corp's new operating assets – dwell Adelaide (280 beds) and Dongdaemun (208 beds) – started operations in 1Q19; Westlite Bukit Minyak (6,600 beds) is expected to start its enrolment in 2Q19.
  • Under the asset enhancement programme for RMIT Village, 113 out of 160 new beds have been completed and the rest are expected to be ready in 2Q19.

Start-up costs and higher finance expenses

  • Start-up costs and higher finance expenses associated with the new operating assets impacted profit (core PATMI -14% y-o-y) in 1Q19. Finance cost increased by SGD1.8m y-o-y, mainly due to new borrowings to fund the new operating assets and an increase in borrowing cost.
  • The implementation of International Financial Reporting Standard (IFRS) 16 had also resulted in SGD0.3m in Centurion Corp's finance expenses. Excluding finance expenses, 1Q19 EBIT would have been flat at SGD18.4m as compared to 1Q18.
  • Once the assets start operating, we expect them to contribute positively to the topline and should see some margins improvement going forward.

Net gearing at 51%.

  • As at 31 Mar 2019, Centurion Corp's cash and bank balances stood at SGD102.6m and total borrowings were SGD772.2m – with SGD80.9m due in less than a year. Coupled with positive cash flow from operations, we think that Centurion Corp is able to meet its debt obligations in the near term as they fall due. Interest coverage ratio is estimated at 2.6x FY19F.

Maintain NEUTRAL

  • Maintain NEUTRAL and DCF-backed Target Price of SGD0.41 (WACC: 4%, TG: 0%).
  • We made a slight tweak to the model to reflect higher administrative and finance expenses in the near term. Additionally, we think that more time is needed to identify yield-accretive assets for the second student accommodation fund portfolio as macroeconomic uncertainty grows.


  • Key downside risks are low occupancy, weakness in rental rates, changes in government regulations and unsustainable capital structure.
  • The converse represents the upside risks.

Lee Cai Ling RHB Securities Research | Jarick Seet RHB Invest | https://www.rhbinvest.com.sg/ 2019-05-14
SGX Stock Analyst Report NEUTRAL MAINTAIN NEUTRAL 0.410 SAME 0.410