Centurion Corp - UOB Kay Hian 2021-08-18: 1H21 Earnings Likely To Have Troughed – Solid Outlook Ahead

CENTURION CORPORATION LIMITED (SGX:OU8)

Centurion Corp - 1H21 Earnings Likely To Have Troughed – Solid Outlook Ahead

Centurion’s in line 1H21 results showed a decent level of resilience now that vaccination rates have reached very high levels in its key market segments, and thus have had a positive knock-on effect on economic activity. At the bottom-line, NPAT was affected by a fair value loss on its investment properties.
We believe Centurion's earnings have troughed and the outlook remains solid. Maintain BUY with P/B-based target price lowered slightly to S$0.43 (previously S$0.445).

Centurion Corp (SGX:OU8) reported in line results for 1H21 with a 3% y-o-y decline in revenue to S$64.7m while gross profit fell 10% y-o-y to S$43.6m. Gross profit margin for the half year was just over 67% which was a 5ppt decline from levels seen in the year-ago period. We note that 1H21 revenue and gross profit made up 51% and 53% of our full-year estimates respectively.
While the company saw lower occupancy rates in Australia, UK’s Purpose Built Student Accommodation (PBSA) and Singapore’s Purpose Built Workers’ Accommodation (PBWA), this was largely mitigated by new assets coming online from Quick Build Dormitories, Migrant Worker Onboarding Centers and higher management fees.

Despite the reasonably solid revenue and gross profit numbers, Centurion's net fair results call that it does not expect to make any further provisions in 2H21.

Costs at Centurion’s PBWA haveFlowering buds of recovery in sight. On the results call, Centurion stated that green shoots of university on-campus programmes as there are varying levels of vaccination rates, movement control restrictions and lockdown policies across its geographic segments.

Lowering earnings for 2021. We have downgraded earnings beds in 2021 (growth of 12% y-o-y), Centurion has seen 3,840 or 45% of the total come online in 1H21.

Maintain BUY with a mild change to our target price to S$0.430 (previously S$0.445), implying a 29% upside. We used a target P/B multiple of 0.6x which is in line with Centurion’s past five-year average P/B of 0.61x, which we believe is fair.
Currently, Centurion Corp's share price trades at 0.44x P/B which is > 1.5 standard deviation below its five-year average. At our target price, Centurion would trade at 9.0x 2022F P/E.
See
We note that our discounted free cash flow model values Centurion at S$0.426 per share using a WACC of 6.5% and a terminal growth rate of 1.0%.

Earlier resumption of domestic and international flights.
Faster-than-expected easing of social distancing restrictions in affected countries.

Adrian LOH UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-08-18

SGX Stock Analyst Report BUY MAINTAIN BUY 0.43 DOWN 0.445