Centurion Corp - RHB Invest 2022-07-26: Stars Are All Aligned; Keep BUY

CENTURION CORPORATION LIMITED (SGX:OU8)

Centurion Corp - Stars Are All Aligned; Keep BUY

We are bullish on Centurion (SGX:OU8) as both its core businesses are now riding the tailwind of the economy as workers’ accommodation is now facing a higher occupancy with an influx of foreign workers since COVID-19 travelling restrictions were lifted. Student accommodation is also flourishing as life returns to a pre-COVID-19 era.

In addition, Centurion also has the ability to raise rates and pass on costs, with rising inflation.

In Singapore, Centurion managed to secure a master lease from JTC Corporation to operate 4 QBDs (Quick Build Dormitories) adding 6,400 beds in 2020, with two of them commencing in 2020 while the other two commenced in 2Q21 and 4Q21.
Centurion also secured contracts to manage 2 Migrant Worker Onboarding Centres (MWOCs) that commenced operations in 1H 2021 which should further expand its revenue streams.
We expect occupancies to recover gradually from the recovery of migrant workers in construction, marine, and process industries. We also expect rental rates to be raised eventually this year.

Centurion's student accommodation business in 1Q22 grew 43% y-o-y to S$11m, mainly due to the improvement in occupancy in the UK, Australia, the US, and Korea.
Centurion’s portfolio in the US, comprises of 6 freehold PBSAs (Purpose-Built Student Accommodations), which are held under the Centurion US Student Housing Fund of which the company holds 28.7% of the units in issue. The fund has commenced the sale process of its US assets, as management continues its strategic review of its portfolio assets, to enhance value for shareholders. We think that the company will also sell its UK assets if a good offer comes along which should reduce gearing even further.
In addition, with inflation running wild especially in the UK and the US, we expect Centurion to raise its dormitory rates by the end of the year which should be positive for the company

With construction activities resuming and demand for workers surging, coupled with global COVID-19 restrictions loosening, we expect Centurion's accommodation business for workers and students to continue to rebound strongly.
Trading at just 4.2x FY22F P/E and a 54% discount to its NAV of S$0.785, we believe Centurion is undervalued, yet it has positive prospects.

Jarick Seet RHB Securities Research | https://www.rhbgroup.com/ 2022-07-26

SGX Stock Analyst Report BUY MAINTAIN BUY 0.430 SAME 0.430