RHB Group Research analyst Alfie Yeo has maintained his “buy” call on Centurion Corp OU8 , with an unchanged target price of 51 cents, citing that he remains upbeat on the group as economies reopen post Covid-19. Yeo’s target price is pegged to the group’s FY2023 P/E of 7.5x.
In his April 25 report, Yeo notes that resumption of foreign labour-reliant industries in Singapore and Malaysia are driving increased demand for related worker accommodation, while the Purpose Build Student Accommodation (PBSA) markets of the UK and Australia will benefit from the return of local and foreign students once borders reopen and on-site lessons resume.
Yeo highlights the group’s FY2022 earnings, where revenue grew 26% y-o-y to $180 million, and core net profit was recorded at $56 million (+5% y-o-y), in line with the analyst’s forecast. The group’s FY ends in December.
This revenue growth was led by a recovery in the company’s occupancies post Covid-19 pandemic, and across all markets, says Yeo.
“Operating margin held steady at 53% with better gross margin (68%, +2.5 percentage points or ppts), offset by slightly higher operating costs while ebit grew 25% y-o-y to $95 million. Headline net profit was $71.4 million (+36% y-o-y), and core net profit was $56 million, stripping out these one-off gains.” he adds.
A final dividend of 0.5 cents was declared, bringing the total dividend for the year to 1 cent, representing a dividend payout ratio of 15% of core earnings.
The analyst expects a positive outlook for 2023, leaving the earnings projections for the year largely unchanged as FY2022 was in line with their expectations. He adds that growth will be driven by an increase in bed supply in Malaysia, and better occupancies in the PBSA segment.
“Even though occupancy rates normalised in Singapore and Malaysia, Singapore continues to see demand for foreign workers outstripping supply for dormitories, while Malaysia’s continues to see increasing foreign worker numbers, with legislative requirement to be housed in purpose built dormitories. These developments in Singapore and Malaysia both bode well for Centurion. It has also secured a ten year management contract for 2,196 beds in Westlite Cemerlang in Johor from 3QFY2023,” says Yeo.
In its PBSA segment of the UK and Australia, Yeo notes that occupancy rates have improved but have yet to reach pre-Covid-19 occupancy levels. However, as more countries lift Covid-19 restrictions this year, Yeo expects occupancy rates in these regions to improve.
As at 1.59pm, shares in Centurion Corp are trading flat at 36 cents.
