RHB Group Research analyst Jarick Seet has maintained “neutral” on Centurion Corporation as headwinds for workers’ and students’ accommodations remain amid the ongoing Covid-19 pandemic.
To date, the number of Covid-19 cases in Singapore and Malaysia, where Centurion Corporation operates, is still on the rise.
See also: Centurion books fair value loss of $14.5 mil, 1HFY2021 earnings down 58% y-o-y
In his report dated Sept 19, Seet has also lowered his target price to 36 cents from 41 cents previously despite the “resilient” numbers posted in the 1HFY2021 ended June. During the six-month period, the dormitory operator saw earnings decline by 58% y-o-y to $8.7 million, while revenue dipped 3% y-o-y to $64.7 million.
“If not for the $14.49 million fair value loss on its properties, 1HFY2021 would have been fairly decent, despite all the Covid-19-related headwinds,” writes Seet.
However, student accommodation is still likely to be impacted by the ongoing travel restrictions. Universities now are also pivoting to deliver their courses via a hybrid of physical and online lectures.
“The average financial occupancy for its UK purpose-built student accommodation (PBSA) was 66% in 1HFY2021, compared to 74% in 1HFY2020. For the upcoming academic year 2021/2022, Centurion has pre-leased over half of its bed capacity,” notes Seet.
Headwinds for workers’ accommodations remain as well. In the 1HFY2021, Singapore registered lower occupancy owing to the restricted inflow of migrant workers and the availability of interim alternative housing to manage Covid-19 risks. This was mitigated by a stable occupancy rate in Malaysia, says Seet.
To this end, he expects the low occupancy rates to persist for Centurion owing to the number of Covid-19 cases in Singapore recently.
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Rounding off, Seet concludes that he likes Centurion for its resilience. However, the impact of Covid-19 on its student and workers’ accommodation businesses should be factored in.
As it is, Seet does not see any immediate rerating catalysts, which are dependent on the resumption of travel and inflow of migrant workers.
“An economic recession and a resurgence of Covid-19 infections [pose as key risks to the counter],” says Seet.
As at 12.22pm, shares in Centurion are trading flat at 33.5 cents, or an FY2021 P/B of 0.5 times and a dividend yield of 2.5%.
