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.
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