Chloe Lim Wed, Jun 08, 2022
RHB Group Research Jarick Seet has kept a “buy” rating on Centurion Corp with an increased target price of 43 cents from 38 cents.
Seet observes that Centurion reported encouraging 1QFY2022 ended March revenue numbers, surging 47% y-o-y, driven by new capacity and business streams from Quick Build Dormitories (QBD) and on-board centres in Singapore, as well as a healthy recovery in occupancy in student accommodation business in the UK and Australia.
“We raise our FY2022 Patmi by 13% to factor in a faster recovery due to waning Covid-19 restrictions globally,” says Seet.
The analyst also expects demand for dormitories to increase, where in Singapore, Centurion managed to secure a master lease from JTC Corporation to operate four QBDs adding 6,400 beds in FY2020 with half of them commencing in 2020 while the other two commenced in 2QFY2021 and 4QFY2021.
Centurion also secured contracts to manage two Migrant Worker Onboarding Centres (MWOC) that commenced operations in 1HFY2021 which is likely to further expand its revenue streams, according to Seet.
“We expect occupancies to recover gradually from the recovery of migrant workers in the construction, marine, and process industries,” writes Seet. “We also expect rental rates to remain resilient for 2022.”
Moreover, student accommodation was observed to rebound strongly, where the student accommodation business in 1QFY2022 grew 43% y-o-y to $11 million mainly due to the improvement in occupancy in the UK, Australia, the US, and Korea.
Centurion’s portfolio in the US comprises six freehold purpose-built student accommodations (PBSA), which are held under the Centurion US Student Housing Fund of which it holds 28.7% of the units in issue. The fund has commenced the sale process of its US assets, as management continues its strategic review of its portfolio assets to enhance value for shareholders.
At this juncture, Seet feels that the “coast is clear” with undemanding valuations for Centurion. “With construction activities resuming actively and demand for workers surging, coupled with global Covid-19 restrictions loosening, we expect its accommodation business for workers and students to continue to rebound strongly,” says the analyst.
Trading at just 4.2x FY22F P/E and a 54% discount to its NAV of 79 cents, Seet considers that Centurion is undervalued currently while it has positive prospects.
As at 10.53am, shares in Centurion are trading flat at 37 cents at a FY2022 P/B ratio of 0.4x and dividend yield of 7.1%.