InvestIdeas

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Singapore Hot Stocks-Centurion falls after placement

SINGAPORE, Oct 18 (Reuters) - Shares of Singapore's Centurion Corp Ltd , formerly known as SM Summit, fell as much as 27.6 percent on Tuesday, on the first trading day since its suspension after the placement of new shares following a reverse take over.

At 0216 GMT, shares of Centurion, which own dormitory assets, were 24 percent lower at S$0.22, following a trading suspension since August 4. Over 12.6 million shares changed hands, 59.6 times its average daily volume over the last five sessions.

Centurion said on Monday it had sold 100 million shares at S$0.21 each in a compliance placement, following a reverse takeover of SM Summit.

"The share price now is actually above its placement price, which shows there is pretty firm demand for the stock," said a local trader.

Centurion said it is in discussions with potential partners to tap into the workers dormitory sector in China, where manufacturing remains a core driver for economic growth.

Source: Reuters

Centurion Corporation: BUY (Initiating Coverage); S$0.555; CENT SP
Ample room for upsides
Price Target : 12-Month S$ 0.77


• Only listed dormitory operator to benefit from higher rents due to severe shortage of purpose-built worker dormitories in Singapore.
• Aggressive expansion in Singapore and Malaysia from c.30k beds today to c.55k beds by 2015.
• Initiate with BUY, DCF fair value of S$0.77.

Singapore’s only listed workers dormitory operator. Centurion is a premier player in the foreign worker dormitory business, garnering c.11% market share with 18,000 beds in three dormitories in Singapore. The Group has also expanded into Malaysia since 2011, operating 11,000 beds as the first and only purpose-built dormitory operator in the country.

With its aggressive growth strategy, the Group has grown from operating 5,300 beds in 2011 to c.30,000 today, with another 25,000 beds in the pipeline by 2015.

Key beneficiary of demand/supply imbalance, enforcement to raise living standards of workers. As an operator of approved dormitories, Centurion is a beneficiary of increasing government rigour in ensuring that minimum housing standards for foreign workers are adopted.

However, the availability of such dormitories is limited – there are c.740k foreign workers vs. c.160k purpose-built dormitories today – and as a result, monthly bed rents have increased c.30% over the past three years.

This shortage should continue to support further rent increases over the next few years. Meanwhile, supply of dormitory land remains scarce due to the relative difficulty in identifying socially and commercially viable land plots for development.

40% core earnings CAGR. Key growth drivers are continued rent increases (we assumed 5% p.a.), higher occupancy and 50% expansion in beds in Singapore from 2013 to 2015 and 120% in Malaysia by 2015. Beyond worker’s dormitory business, Centurion has also expanded its mandate to include student accommodation in the region.

BUY, TP S$0.77. Including the potential dilution from a proposed 1-for-10 bonus issue of warrants, we derived a DCF-based TP of S$0.77, assuming 6.97% WACC. Further acquisitions and higher than expected rent rates are potential upsides, while there are risks of higher land/construction costs resulting from competition and regulatory changes.


Source: DBS
Source: DBS

not vested

Proposed acquisition of four UK student dormitories to add 1,906 beds. Centurion announced the proposed acquisition of one Liverpool and three Manchester student dormitories for a total purchase consideration of £77m (S$164.5m) on 16 July 2014, its largest and most ambitious purchase to date.

As this proposal constitutes a major transaction, it will be subject to shareholders’ approval at an upcoming extraordinary general meeting. If approved, the acquisition is expected to be completed in September 2014.

Right price for high-occupancy, well-located operational assets. After factoring in acquisition and management costs and based on the dormitories’ January-March 2014 profits of £1.5m (S$3.25m), we estimate the NPI yield of the proposed acquisition to be well over 7%, an attractive price given all four dormitories are currently operational and have high occupancy rates as they are very well-located.

For instance, Manchester Student Village is directly across the road from Manchester Metropolitan University’s John Dalton Building and one block away from Manchester Law School.

Planting a flag for the “next big thing”. This is another step for Centurion towards becoming an international student dormitory operator highlighted in our January 2014 initiation. Also, we think further upside lies in:
i) redevelopment and asset enhancement initiatives to add beds and improve rental rates on aging assets such as Manchester Student Village, and
ii) acquisitions of other UK assets and further economies of scale once an operational base is established.

Reiterate BUY, TP $0.890 on international potential. We keep our target price unchanged as Centurion will take on a significant amount of debt - we conservatively estimate that the acquisition will be 75% debt funded (S$123m) with the rest from cash, and that FY15 all-in interest costs increase to 3.2% with some sterling borrowings.

However, at 4.3 FY14F times interest earned and S$61m cash flow from operations, we think Centurion can afford to expand.

Redevelopment initiatives are not factored into our valuation and provide further upside in our view. As-is, the acquisition should see FY14 core profits improve by S$2.5m (FY15: S$8.2m).

Source: Am Fraser

Not vested

Centurion mulls establishing a dormitory REIT
http://sbr.com.sg/commercial-property/m ... itory-reit

not vested

Centurion is one of the largest providers of workers’ accommodation in Singapore and Malaysia.

At a stock price of S$0.42, Centurion is trading at 0.8x P/B and 8.6x 2016F PE.

Current prices are also likely to be supported by the Group’s share buybacks at S$0.42/share.

Of note, the group also owns student dormitories in UK and Australia which contributes to about 25-30% of its earnings, providing a defensive element to its already highly recurring earning streams.

Source: UOBKH

Centurion Corp's 4Q earnings down 90% to $7.5 million
http://sgx.i3investor.com/servlets/fdnews/58291.jsp

Centurion's FY16 earnings fall 16% decline on investment properties fair value loss
http://sgx.i3investor.com/servlets/fdnews/66639.jsp

Centurion posts 15% growth in 1Q earnings to $10.7 mil on higher revenue
http://www.theedgemarkets.com.sg/centur ... er-revenue

centurion-acquiring-5-us-varsity-dorms-187-mil-take-30-stake-portfolio
https://www.theedgesingapore.com/centur ... -portfolio

centurion-posts-72-rise-2q-earnings-145-mil
https://www.theedgesingapore.com/centur ... gs-145-mil