CENTURION CORPORATION LIMITED (SGX:OU8)
Centurion Corp - Stay NEUTRAL Amidst COVID-19 Uncertainty
- Centurion Corp (SGX:OU8)’s 4Q19 revenue grew 15% y-o-y to SGD36m, mainly on contributions from newly-added beds in both purpose-built student and worker accommodations (PBSA and PBWA respectively). Gross profit and core PATMI were higher at SGD26.7m (+16% y-o-y) and SGD11.3m (+41% y-o-y) in 4Q19.
- We remain NEUTRAL, amidst the ramp-up of the COVID-19 outbreak, and as the World Health Organization raises the threat assessment to its highest.
FY2019 core PATMI rose 12% y-o-y to SGD38.2m.
- Centurion Corp's FY19 revenue grew 11% y-o-y to SGD133.4m as a result of: newly-acquired and leased assets – dwell East End Adelaide in Australia, Westlite Juniper in Singapore, dwell Princess Street and dwell Castle Gate Haus in the UK; higher occupancy rates for its Singapore workers accommodation portfolio; and additional beds derived from asset enhancement initiatives in RMIT Village Melbourne.
- In line with revenue growth, gross profit and core PATMI increased 12% y-o-y to SGD97.0m and SGD38.2m, vs our 13% y-o-y estimate. We raise our FY20-22 growth forecasts to between 8-9%.
Share of profit of associated companies and JV decreased by 88% y-o-y to SGD0.8m in FY19.
- The loss of SGD3.4m in 4Q19 as compared to a profit of SGD1.6m was mainly due to fair value losses on investment properties in the US student portfolio for approximately SGD5.2m. Excluding the fair value revaluation, the contribution from the US student housing fund was down by SGD.1m, due to lower occupancy rates.
- We expect the weaker demand to persist, due to the COVID-19 outbreak risks on top of the US-China trade war.
Net fair valuation gains of SGD66.3m in 4Q19
- Net fair valuation gains of SGD66.3m in 4Q19 was mainly due to the SGD70m revaluation gain for the Toh Guan dormitory, as the leases were extended by an extra 25 years, offset by other PBWA assets.
- The lease expiry for Toh Guan PBWA is being extended to Nov 2057, from Sep 2032 by the Singapore Land Authority. In exchange, the group will redevelop a block at its facility into an 8-storey dormitory and industrial training centre with ancillary commercial use.
- The number of beds will remain the same, at 7,800. Including the fair value gains, reported NPAT and PATMI were SGD103.8m (+23% y-o-y) and SGD100.0m (+26% y-o-y) respectively.
Stay NEUTRAL
- Stay NEUTRAL even though Centurion Corp is a defensive play, and its recurring income provides a buffer from any earnings downside. However, in a global pandemic situation, we are uncertain on the impact of COVID-19 has on the group.
- We raised our DCF-based Target Price to SGD0.49 as we lifted earnings forecasts by 8-9% y-o-y, while rolling over numbers to a new financial year.
- See Centurion Corp Share Price; Centurion Corp Target Price; Centurion Corp Analyst Reports; Centurion Corp Dividend History; Centurion Corp Announcements; Centurion Corp Latest News.
Jarick Seet
RHB Securities Research
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https://www.rhbinvest.com.sg/
2020-03-02
SGX Stock
Analyst Report
0.49
UP
0.470
