Centurion Corp - RHB Invest 2020-04-29: Hit By COVID-19 Pandemic

CENTURION CORPORATION LIMITED (SGX:OU8) | SGinvestors.io CENTURION CORPORATION LIMITED (SGX:OU8)

Centurion Corp - Hit By COVID-19 Pandemic

  • Global movement restrictions are likely to continue in the coming months as the number of COVID-19 cases remains prevalent, resulting in lower occupancy rate for Centurion Corp (SGX:OU8)’s student accommodation.
  • We shave FY20F-22F earnings by 25%, 15% and 4% on the back of lower than previously expected occupancy for the upcoming semesters and early lease termination, as we raise our WACC assumption to reflect higher market volatility.



The return of students remains the missing piece of the jigsaw puzzle.

  • Travel restrictions, course deferment options, move to online learning and a potential second wave of COVID-19 could affect the Purpose Built Workers Accommodation’s (PBWA) occupancy rate negatively. Factoring in the uncertainty of students returning to universities in the upcoming semesters, the early lease termination, and challenges faced in securing occupants, we lower our occupancy rate estimation from c.93% to 60% for FY20F and 78% for FY21F for its UK portfolio.
  • Due to a high exposure to international students, we forecast for its Australia student occupancy rate to drop to 60% from 78%.


Two PBWA gazetted as isolation areas.

  • With more than 10,400 of 14,400 confirmed COVID-19 cases in Singapore coming from the dormitories, the Government has gazetted 25 dormitories as isolation areas. These include Centurion Corp’s Westlite Toh Guan and Westlite Mandai. However, we do not think that there is material impact to its financial performance as rental contracts tend to be for a period of one year.
  • The Ministry of Manpower has also strongly advised employers to pay the dormitory operators on time. We have revised our previous estimated occupancy rate from c.96% to c.93% as we expect few businesses to go under. Some of the unoccupied beds should be filled as demand for quality housing is likely to remain despite the pandemic.


Near-term pressure and lack of immediate catalysts.



Remain NEUTRAL

  • Remain NEUTRAL with a lower DCF-based Target Price of SGD0.41.
  • We raised our WACC assumption from 4.9% to 5.1% to reflect market volatility and a higher equity risk premium.





Lee Cai Ling RHB Securities Research | Jarick Seet RHB Invest | https://www.rhbinvest.com.sg/ 2020-04-29
SGX Stock Analyst Report NEUTRAL MAINTAIN NEUTRAL 0.41 DOWN 0.490



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