Centurion Corp

Price target:

RHB Bank Singapore ‘buy’ 45 cents

Hong Kong debut

Centurion Corp’s bid to expand into the student accommodation market in Hong Kong is not seen to have a significant bearing on its earnings for now.

The entry into Hong Kong marks the company’s expansion into this new market, given how its key markets now are Singapore, Malaysia and the UK.

Nonetheless, given its growth outlook with ongoing capacity expansion, RHB Bank Singapore’s analyst Alfie Yeo is keeping his “buy” call and 45 cents target price on this stock.

On April 9, Centurion announced it has set up a joint venture with LionRock Property in a 60-40 mix, which has signed a five-year master lease for a building in Kowloon which will be refurbished into a 66-bed student accommodation.

The refurbishment works will cost around $2 million and the property will be operational in September.

“This development is in line with Centurion’s strategy to grow its accommodation business globally, via an asset-light approach,” writes Yeo in his April 18 note.

“However, with just 66 beds, minimal capex outlay for refurbishment and a 60% stake, the scale of this project is small compared to the company’s other key operations. Hence, we expect minimal change to overall earnings for now, which translates into a neutral stock impact,” reasons Yeo.

This aside, Yeo is keeping his positive stance on this counter on higher bed capacity down the road, with the total number of revenue-contributing beds seen to grow 6.5% y-o-y to 70,166.

The additions will come from Westlite Johor Tech Park and Westlite Senai II, and also the new Singapore site at Westlite Ubi Ave 3.

“We like Centurion for being well-positioned to yield better rental rates in Singapore due to the dormitory supply shortage situation and better occupancy in Malaysia as its increasing number of foreign workers are to be housed in purpose-built dormitories.

“We believe these developments in Singapore and Malaysia will continue to bode well for Centurion,” says Yeo. —