Centurion Corporation - DBS Research 2022-03-30: Foreign Labour Bottoming; Returning Dividend Play

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CENTURION CORPORATION LIMITED (SGX:OU8)

Centurion Corporation - Foreign Labour Bottoming

• Centurion Corp's FY21 core PATMI rises 11.4% y-o-y to S$143.0m.
• FY22 and FY23 PBWA and PBSA occupancies expected to bounce back as workers and students return.
• Singapore PBWA regulatory overhang a concern but impact will likely be spread out over years.

FY21 resilient despite Singapore PBWA concerns

• Centurion Corp (SGX:OU8)'s FY21 revenue grows 11.4% y-o-y to S$143.0m. FY21 core PATMI rises 12.5% y-o-y to S$46.5m
• Dividend of S$0.005 per share proposed, representing a yield of 1.4%.
• PBSA revenue declined to S$32.1m (-10.4% y-o-y) as Australia average financial occupancy fell to 26% in FY21.
• PBWA revenue jumped to S$109.4m (+19.5% y-o-y), helped by higher Malaysia PBWA occupancies and contributions from Singapore quick-build dormitories.

Global reopening to buoy Singapore, Australia, and UK accommodation revenue.

• Singapore’s purpose-built worker accommodation (PBWA) occupancies are expected to improve progressively over FY22 and FY23, with the foreign labour crunch targeted to be resolved in the next few months, according to a senior government official.
• In a similar vein, a new academic year and the relaxation of border restrictions in Australia and the UK should mark a point of recovery for student arrivals and, in turn, purpose-built student accommodation (PBSA) occupancies.

Returning dividend play.

• We are forecasting for Centurion to return as a dividend play, underpinned by improved occupancies across its PBSA and PBWA segments. FY22F and FY23F dividend are projected to come in at S$0.015 and S$0.02, respectively, representing a yield of 4.2% and 5.6%.

Regulatory overhang remains, but impact could be dampened.

• New regulations for workers’ dormitories are expected to reduce the capacity at said dormitories, but early information points to rental rates remaining steady. Still, additional capex may be incurred in adapting the dormitories to these new standards, although we believe this will likely be over time instead of as an upfront lump sum.

Valuation

• Maintain standards, but this will likely be incurred over time instead of as a lump sum upfront.
• See
  • Centurion Corp's Share Price,
  • Centurion Corp's Target Price,
  • Centurion Corp's Analyst Reports,
  • Centurion Corp's Dividend History,
  • Centurion Corp's Announcements,
  • Centurion Corp's Latest News.

Woon Bing Yong DBS Group Research | Lee Keng LING DBS Research | https://www.dbs.com/insightsdirect/ 2022-03-30

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