Analysts from CGS International (CGSI), RHB Bank Singapore and UOB Kay Hian (UOBKH) have kept their respective “add” and “buy” calls on Centurion Corp at raised respective target prices of 78 cents, 76 cents and 85 cents.
The update from the analysts follows the company’s 47% y-o-y growth in core profit after tax and minority interests (patmi) to $48 million during its 1HFY2024 ended June.
RHB’s Alfie Yeo stays positive on Centurion Corp, seeing growth driven by higher bed capacity, occupancy and rental rates.
He notes that the company’s revenue of $124 million for the 1HFY2024 beat his forecast, while its interim dividend per share (DPS) of 1.5 cents met expectations.
Attributing most of Centurion’s outperformance to better bed rates, the analyst has raised his FY2024, FY2024 and FY2026 earnings by 10%, 12% and 12% respectively.
“Growth will be driven by an increase in bed capacity, which will expand by around 2,393 beds in FY2024. This includes its recent entry into Hong Kong via two 66 and 89-bed purpose-built student accommodations (PBSAs) that are expected to be operational in September,” concludes Yeo.
See also: UOBKH calls Centurion Corp a stock for ‘growth-minded investors’
Centurion’s results were above CGSI’s expectations as well, forming 62% of their full-year forecast.
On Centurion’s 29% y-o-y growth in purpose-built workers accommodation (PBWA) segment revenue, CGSI’s Ong Khang Chuen and William Tng note: “While spot rent growth for worker dorms in Singapore has moderated in recent months, we expect strong rental reversions to continue for Centurion in the 2HFY2024 as leases continue to be renewed throughout the rest of the year.”
UOBKH’s Adrian Loh concurs, seeing space for positive rental rate revisions in the next 12 to 18 months, as Centurion guided that its average rental rate per bed is around $450 to $500, against some rates at $600.
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Centurion is also on track to grow its PBWA bed supply by 5% by end-FY2024, with the expected completion of a new purpose-built dormitory in Singapore, asset enhancement initiatives (AEI) in Malaysia and foray into Hong Kong, CGSI analystshighlight.
The company’s entry into Hong Kong is to seize the growing demand for foreign workers supported by the region’s enhanced supplementary labour scheme and underserved demand for student accommodation.
Revenue in the purpose built student accommodation (PBSA) segment similarly grew 23% y-o-y in the period, driven by improvement of financial occupancy to 99% in the UK and 94% in Australia, as well as healthy rental reversions due to the continued PBSA supply shortage in both markets.
Moving forward, the CGSI analysts believe Centurion is on the lookout for more opportunities for portfolio expansion and redevelopment to grow its portfolio.
With this, they raise their FY2024 to FY2026 earnings per share (EPS) by 17.7% to 20.8% on higher rental rate and margin assumptions.
They conclude: “We see Centurion riding on favourable industry dynamics amid ongoing regulatory reforms to improve migrant worker housing standards.”
UOBKH’s Loh highlights Centurion’s solid balance sheet. He points out that the company has continued to lower its gearing levels. As at end-1HFY2024, Centurion had a net gearing of 34% versus 43% in 1HFY2023 and 38% at end-FY2023.
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Including the $61 million fair value gain on the company’s investment properties, Loh has “nearly doubled” his FY2025 and FY2026 earnings estimates to 6% and 9% respectively, to account for the new bed capacities in Malaysia, Singapore and Hong Kong, offset by the sale of its two assets in the US.
While he has maintained his current forecast dividend of 3 cents for the full year, he sees “a high likelihood” of an upside to 3.5 cents given Centurion’s strong earnings.
Loh concludes: “Year-to-date, Centurion’s 61.7% share price increase has easily outperformed the STI’s 4.8% return and we expect continued outperformance in the next 12 months.”
As at 12.00 pm, shares in Centurion are trading 1.5 cents higher or 2.29% up at 67 cents.
