Analysts from PhillipCapital and CGS International (CGSI) have raised their target price for Centurion Corporation OU8 , following the company’s 3QFY2024 results ended Sept 30, which saw a strong occupancy and rental reversion rate across all segments.
PhillipCapital's Yik Ban Chong has raised his target price from 90 cents to $1.02, and maintained his "accumulate" call; while CGSI's Ong Khang Chuen and William Tng have raised their target price from 78 cents to $1 and kept their "add" call.
Yik says that Centurion’s revenue was 78% of their FY2024 forecasts, and the 9MFY2024 revenue from Purpose-Built Workers Accommodation (PBWA) in Singapore was 79% of his FY2024 forecasts due to strong occupancy and rental rate revisions.
He notes that the group’s occupancy is currently 99%, and its 3QFY2024 revenue for Singapore PBWA and UK Purpose-Built Student Accommodation (PBSA) segments increased 26.5%/21.4% y-o-y, respectively.
Centurion has a positive portfolio growth pipeline, with capacity expansions ongoing, notes the analyst. About 1,650 Singapore PBWA, 680 Malaysia PBWA beds, and 550 Hong Kong PBWA beds are expected to be operational by the end of this year, while 155 Hong Kong PBSA beds have been operational since September 2024 and are expected to ramp up occupancy gradually.
Yik adds that 400 units have been secured under master lease agreements in Xiamen, China, under the new Build-to-Rent (BTR) segment and are expected to be operational from December 2024.
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Centurion’s interest cover ratio increased by 32% y-o-y from 3.4 for 9MFY2023 to 4.5 for 9MFY2024, showing signs of increased profits, says Yik.
“We expect profit growth to be continually driven by revenue growth and lower interest expenses. We expect interest expenses to decline by $2.8 million y-o-y in FY2024 from improving free cash flows and lower interest rates,” he adds.
With no negatives mentioned, Yik raises his FY2024 revenue and patmi estimates by 3% and 9% respectively, as he expects strong occupancy and rental reversions across all segments to continue.
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He also expects profit to continue to grow, and further cuts in Fed fund rates to drive bottom-line profit growth.
Likewise, Ong and Tng from CGSI reiterate their "add" on Centurion as they see the company riding on favourable industry dynamics amid ongoing regulatory reforms to improve migrant worker housing standards. They note that CEO Kong has recently identified "unlocking value from our assets" as a priority.
As such, the analysts raise their target price to $1 based on a blended valuation as they narrow their realisable net asset value discount with a higher likelihood of capital recycling plans materialising and roll over their valuation base year.
"Re-rating catalysts include continued strong rental reversion and successful execution of its capital recycling strategy. Downside risks include steeper increase in financing costs, and lower bed capacity utilisation on increased supply," they note.
As at 3.32pm, shares in Centurion are trading 0.5 cents higher or 0.559% up at 90 cents.
