SINGAPORE (Apr 22): DBS Group Research is maintaining its “hold” call on housing operator Centurion Corp at a target price of 41 cents.
This follows the operator's Tuesday announcement on allowing residents at its purpose-built student accommodation (PBSA) properties in the UK to terminate their leases early.
The move is in response to the UK government’s nation-wide lockdown that has seen some international students returning to their home countries to continue their studies virtually.
Estimating PBSA occupancies to dip between 28% and 50%, DBS analyst Lee Keng Ling predicts the operator will have to draw on some $8 million in cash for refunds to leaving tenants.
Revenue and operating profit for the segment will correspondingly fall $7.5 million and $4 million respectively, she adds.
Meanwhile, Ling expects the operator to make a similar pre-termination offer to residents at its PBSA facilities in Australia. Noting the improving Covid-19 situation there, Ling estimates occupancies to stay at around 70%, for now.
Touching on the group’s purpose-built workers’ accommodation (PBWA) operations in Singapore which have been thrust into the spotlight, Ling anticipates the occupancies to stay resilient at around 90%.
“We understand that [government's] measures have had little impact on Centurion’s financial occupancy at the moment,” she shares.
“Customers have continued to pay for beds in the dormitories even as some workers have shifted out and are housed in government procured housing. We [also] think the foreign worker levy rebates could support occupancies”.
Looking ahead, Ling believes the operator has sufficient liquidity to tide the short-term challenges of the crisis. For one, it has cash savings and lower capital expenditure from delays to the reconstruction of a block at its Westlite Toh Guan dormitory.
“Centurion’s liquidity remains sufficient given its cash on hand of S$40.6m and unutilised credit facilities of S$109.5m as compared to the maturing borrowings of S$56m and S$91m for FY20 and FY21 respectively,” Ling points out.
However, she expects FY2020 to come in 10% lower which possibly translates to no dividend payout in a bid to conserve cash.
As at 2.20pm, shares at Centurion Corp were down 0.5 cents or 1.32% to trade at 38 cents.
