RHB Bank Singapore’s analyst Alfie Yeo has raised his target price for Centurion Corporation OU8 to $1.06 from 76 cents previously, on the back of better purpose-built workers accommodation (PBWA) bed rates in Singapore and longer-term growth supported by overseas properties.
RHB’s Yeo has kept his “buy” call on the company and raised his earnings and target P/E estimates based on Centurion’s projected earnings for FY2025.
Centurion recently announced that it entered into a framework agreement with accommodation services company Xiamen City Home Apartment Management to establish two joint ventures (JV) to retrofit, renovate and, or manage and operate build to-rent (BTR) residential accommodation targeting working professionals in Xiamen, located in the Fujian province.
Centurion will hold 51% in the JV. Two projects totalling about 1,500 BTR apartments have been identified in central Xiamen under the JV. Both projects have 20-year master leases with the property owners.
Yeo says that these overseas developments will support longer-term growth, but have negligible impact for the near term and have therefore left Centurion’s immediate term growth largely unchanged.
Meanwhile, the group’s PBWA bed rates in Singapore have continued to be robust and due to the demand-supply situation, says Yeo, who sees ongoing upward rental reversions lifting average bed rates going forward.
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“In view of the strong demand, we raise our Singapore PBWA bed rate assumptions for FY2025-FY2026 by 10%-15% to $400 - $450 per bed per month. This results in a +12% and +17% change in our FY2025-FY2026 earnings,” says Yeo.
The analyst also ascribes a higher P/E to his target price to 9 times from 7.5 times, or around +0.5 standard deviation from its historical mean to account for longer-term growth potential in new overseas markets including Hong Kong and Xiamen.
As at 3.49pm, shares in Centurion are trading 2.5 cents higher or 2.994% up at 86 cents.
