SINGAPORE (Oct 7): RHB Group Research is maintaining its “neutral” call on Centurion Corp with an unchanged target price of 43 cents, on the back of its purpose built workers accommodation (PBWA) performance.
The PBWA assets provide a safe and secure environment for foreign workers, along with a range of amenities such as gyms, supermarkets and sick bays.
“The increasing awareness of the need for improved living conditions of foreign workers has led to the rising demand for quality workers accommodation,” says lead analyst Lee Cai Ling in an Oct 7 report.
Centurion’s PBWAs in Malaysia had an average occupancy rate of 90.2% in 1H19, Lee notes. In a site visit to two PBWAs in Johor, Malaysia, she notes that the closest peer to Centurion’s Westlite Senai II is operating at 80% to 85% occupancy rate.
Centurion’s two PBWAs in Johor, Westlite Tampoi and Westlite Senai II, are sitting on freehold land, and house about 5,300 and 5,900 beds respectively.
Rental rates at the properties average RM110 to RM130 a mouth, with revenue from the two properties adding up to about RM14.5 million or $4.8 million. This comes up to about 4% of Centurion’s FY2018 revenue.
The residents in these PBWAs include workers from large multinational corporations such as Flextronics Corp.
In Singapore, Centurion’s PBWA, Aspri-Westlite Papan, is the first PWA with a built-in training centre for the process, construction and maintenance industry. This property has 7,900 beds and is located near Jurong Island, housing workers from companies supporting the oil and gas sector in Singapore.
Lee also visited Centurion’s purpose built student accommodation (PBSA) in Singapore, dwell Selegie.
This property is in close proximity to several education institutions, and achieved 87.3% average occupancy in 1H19.
This is Centurion’s only student accommodation in Singapore, with a capacity of 332 beds. It is part of a global portfolio of 20 student accommodation assets with 6,256 beds in Australia, Singapore, South Korea, the UK and US.
Centurion has also centralised some of its security operations in its properties, excluding the UK with the global security operations centre. The centre controls and monitors closed circuit TVs and door access of PBSAs and PBWAs. The eight personnel work on a 14-hour operations schedule in the global centre, as well as security officers on the ground to ensure safety of the properties and residents.
However, Lee cautions that there are some key downside risks for Centurion. There include low occupancy levels, weakness in rental rates, changes in government regulations and an unsustainable capital structure. “The reverse of these factors represents the upside risks,” says Lee.
As at 2.57pm, shares in Centurion are trading flat at 40 cents. This implies an estimated price-to-earnings (PE) ratio of 9.9 times and a dividend yield of 5.0% for FY19F.
