CENTURION CORPORATION LIMITED (SGX:OU8)
Centurion Corp - Minimal Impact From COVID-19 In 1H20
- Centurion Corp's 1H20 core net profit of S$21m (+16.3% y-o-y) was a beat on the back of government support and lower financing costs. Reiterate ADD with S$0.40 Target Price.
- While PBWA occupancy in Singapore held steady at 98.5% in 1H20, we see bad debt and regulatory changes as downside risks.
- PBSA occupancy in the UK and Australia was better than expected, with gradual recovery led by domestic students.
Centurion Corp's 1H20 core net profit up 16% y-o-y, above expectations
- Centurion Corp (SGX:OU8) posted 1H20 core PATMI of S$21m (+16.3% y-o-y), above our/consensus estimates at 65%/68% of full-year forecast, thanks to c.S$2m government support and S$2.2m lower interest expenses. 2Q20 was a weaker quarter than 1Q20 (pre-COVID-19), with 2Q contributing 43% of total 1H20 profit. We expect a weaker 2H20F (vs. 1H20) due to additional operating costs to manage the COVID-19 situation and bad debt provisions.
- Centurion Corp's 1H20 topline rose 4% y-o-y, with revenue contributions from Westlite Juniper (commenced in 3Q19) and Dwell Archer House in the UK (commenced in 4Q19), which offsets the 8% PBSA revenue decline due to the early lease termination in the UK (c.£3.0m).
PBWA remains resilient in the near-term
- We expect Centurion Corp’s purpose built workers' accommodation (PBWA) financial occupancy to remain stable in FY20-22F (1H20: 98.5%) given the tight housing demand-supply dynamics in Singapore, with potential new opportunities from government’s recent plans to develop 60,000 temporary beds and 100,000 more permanent beds over the next 1-3 years. This could allow Centurion Corp to secure new management contracts and expand its scale in a fast, asset-light manner.
- Other risks for PBWA include further debt delinquencies, muted rental reversions and regulatory changes which could reduce its current capacity.
Gradual recovery in PBSA occupancy led by domestic students
- We saw 1H20 average purpose-built student accommodation (PBSA) occupancy fall to 74% (FY19: 93%) in the UK and 68% (FY19: 89%) in Australia due to the pandemic and travel restrictions which affected international student enrolment. However, bookings for 2020 have been better than expected, partly due to the economy reopening and support from domestic students. In the UK, c.70% of beds are filled by local students.
Reiterate ADD with a lower S$0.40 DCF-based TP
- We raise our Centurion Corp's FY20-22F EPS forecasts by 3.9-13.0% to reflect lower financing costs, government support and slightly higher occupancy rates in the UK/Adelaide, but our DCF-based Target Price falls to S$0.40 (WACC: 4.6%) on lower terminal growth rate (previously 1%). Maintain ADD.
- See Centurion Corp Share Price; Centurion Corp Target Price; Centurion Corp Analyst Reports; Centurion Corp Dividend History; Centurion Corp Announcements; Centurion Corp Latest News.
- No interim dividend was declared for 1H20 (1H19: 1 Scts) and major capex plans are being deferred as the group plans to conserve its cash resources in view of COVID-19. See Centurion Corp Dividend History.
- Re-rating catalysts: faster lifting of travel restrictions, recovery in construction sector and government support.
- Downside risks: debt delinquencies and unfavourable regulatory changes.
NGOH Yi Sin
CGS-CIMB Research
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Caleb PANG Huan Zhong
CGS-CIMB Research
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https://www.cgs-cimb.com
2020-08-19
SGX Stock
Analyst Report
0.40
DOWN
0.450
