Centurion Corporation - Workers' Dormitory Specialist

Better things to come
We believe that Centurion’s  purpose built dormitory business is scalable, particularly in economic areas which rely heavily on foreign-sourced workers. Given its success in executing its aggressive bed growth strategy so far, we are optimistic about the Group’s long-term potential. Maintain BUY, TP S$0.59.

Successfully executing aggressive growth strategy
Based on our estimates, net profit and EPS are forecasted to grow by a 2- year CAGR of 25% from FY14-16. Earnings will be driven by progressive completion of new purpose-built beds amounting to 80% of current bed count, as well as contribution from recently acquired student dormitory assets.

First-mover advantage in purpose-built worker dormitories in Singapore and Malaysia
Centurion currently owns and/or operates close to 45k purpose built-foreign worker dormitory beds in Singapore (24k beds) and Malaysia (20k beds), making it one of the largest purpose-built dormitory operators in the region. With an additional c.35k beds in the pipeline, we expect a 16% CAGR in bed count from 2015-2017. The Group also owns a portfolio of student dormitory assets in Singapore, Australia and the UK, totalling c.2.8k beds.

Technical Analysis
Daily Chart
Valuation:
At its current price, Centurion is trading at 9x FY15F PE and 8x FY16F PE, which is attractive in our view. We maintain our BUY call, with a DCF-backed TP of S$0.59.

Key Risks to Our View:
Downturn in the Singapore economy. While there is still an acute supply/demand imbalance in the provision of purposebuilt dormitories for foreign work permit holders in Singapore, a sustained deterioration in Singapore’s economic outlook could adversely affect demand for labour and subsequently negatively impact rents. (Read Report)

Source : DBS Group Research

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