SINGAPORE (Aug 10): RHB Research is maintaining “neutral” on Centurion Corp with a target price of 47 cents on expectations of a 3.4% FY18F dividend yield.
This comes after Centurion’s 2Q18 results met the research house’s estimates, posting 15% lower earnings of $9.1 million in the absence of contributions from the group’s Westlite Tuas dormitory, which ceased operations in Dec 2017.
In a Thursday report, analyst Jarick Seet highlights that Centurion’s management is “working hard” to find new revenue sources, such as from the potential establishment of a second accommodation private fund as well as expansion into the student accommodation segment.
“Management is looking at a fund size of $100-200 million and targets to close by year-end. It will likely inject the newly-acquired Princess Street accommodation into the fund and expect to generate an internal rate of return of 10-15%. Centurion Corp is likely to benefit from the management and property management fees,” says Seet.
“Management is looking to further expand into the student accommodation segment, especially in the US. It is targeting to add another 7,000 beds by year-end,” he adds.
Nonetheless, Seet believes the group’s earnings in the current financial year are likely to remain muted on account of the absence of its Tuas dormitory – although further student accommodation acquisitions in Australia and the UK would serve as key drivers of growth.
“Key downside risks are weakness in rental rates in the dormitory space and changes in government regulations. The converse represents the upside risks,” concludes the analyst.
As at 3:14pm, shares in Centurion are trading 1.5 cents lower at 44 cents or 0.69 times FY18F book.
