SINGAPORE (March 2): RHB is remaining “neutral” on Centurion with a target price of 39 cents after its 4Q16 results came in line with the research house’s estimates.
The owner and operator of dorms for students and workers on Wednesday posted a 16% decline in FY16 earnings to $28.7 million after being impacted by a one-off revaluation loss that exceeded $10 million, although its core business’ net profit rose 8% y-o-y to outperform its peers in the industry despite downwards pressures on dormitory rent.
(See also: Centurion’s FY16 earnings fall 16% decline on investment properties fair value loss)
“We still expect Centurion to see more downward pressures on rental rates, due to the tepid outlook for the Singaporean construction sector. However, we expect its student accommodation sub-segment to be able to support group earnings,” says RHB analyst Jarick Seet in a report on Thursday.
Although Seet notes that the group was still able to maintain an occupancy rate of 95% and average rental rates of $270 in Singapore despite headwinds and being impacted by a drop in rental rates across the industry, he remains “cautiously optimistic” on the outlook of the Singapore workers accommodation business.
On the student accommodation front, the analyst believes the group is likely to invest its resources in adding on to its portfolio while continuing to build Dwell, Centurion’s brand for new dynamic student accommodations.
“As of FY16, [the group] has 10 operating [student accommodation] assets with a total capacity of 3,208 beds. Education has been a defensive industry, with annual step-up rental rates,” he adds.
“We believe that Centurion would likely be able to weather through the tough times. However, we also think that growth may likely be hampered by the tough economic conditions affecting its workers’ accommodation segment,” concludes Seet.
As at 9.36am, shares of Centurion are trading flat at 40 cents.
