Centurion Corporation Limited: Core Business Operations In Line With Expectations March 3, 2017 583

PSR Recommendation: ACCUMULATE Status: Downgraded
Target Price: 0.42
  • 4Q16 PATMI of SGD2.9mn missed our 4Q16 estimate of SGD9.6mn by 70%.
  • Surprise came from higher valuation losses from Westlite Toh Guan.
  • Proposed a final dividend of S$0.01 per share, payable on 19 May 2017.
  • Downgrade to “Accumulate” from previous “Buy” rating with unchanged target price of SGD0.42.

1

  • 4Q16 revenue grew 23.7% quarter-on-quarter (“q-o-q”).

The growth was contributed by four new student accommodation properties in United Kingdom acquired in 3Q16 and by improved occupancy for workers’ dormitories at Westlite Woodlands (90% in 4Q16 vs. 75% in 3Q16) and ASPRI-Westlite Papan (75% in 4Q16 vs. 20% in 3Q16). Positive rental reversions of approximately 3% from Australian and United Kingdom student accommodation business also supported the revenue growth. We expect the renovations and upgrades to student accommodation assets in the United Kingdom and Singapore to support a c.3% rental growth in FY17F.

  • We expect Westlite Dormitories in Singapore to operate in full capacity by end of 2017.

Management estimates that a progressive reduction in supply of Temporary Purpose-Built Worker Accommodation (“PBWA”) and Factory Converted Dormitories (“FCD”) over time would cause a total shortage of between c.150,000 and c.180,000 PBWA beds. Management expects the stricter conditions for FCDs that came into effect from 1 January 2017 would force some FCDs out of the market and cause more foreign workers to shift into PBWAs. At the same time, an estimated net decline of 6,000 PBWA beds owing to expiration of c.35,000 temporary PBWA beds in 2017 would weigh down on available supply. As the shortage gap widens this year, we expect occupancy for Westlite Dormitories to ramp up quickly to hit full capacity by end of 2017.

  • Land lease for Westlite Tuas expires in April 2017.

Currently the URA Master Plan zoning type for the Westlite Tuas is “Business 2” which provisions an ancillary component for workers’ dormitory use. The renewal of the lease and its conditions are still under negotiations. However, we continue to assume that the lease will not be renewed and have excluded earnings projection for Westlite Tuas after 1Q17.

  • Westlite Bukit Minyak progressed from “Under Planning” stage to “Under Development” stage.

The Westlite Bukit Minyak project has broken ground and it is expected to be completed in 2018.  Thus we revised our projections and expect Westlite Bukit Minyak to begin operations in mid-2018 (previously beginning of 2019).

  • RMIT Village Asset Enhancement Initiatives (“AEI”).

Plans for a new accommodation block has been finalised but the additional capacity has not been disclosed. We do not expect the AEI to disrupt the existing occupancy.

 

Downgrade to “Accumulate” from previous “Buy” rating with an unchanged price of SGD0.420. Recent price movement met our expectations based on our assumptions of Centurion Corporation Limited’s operations. But further upside can be expected if the land lease on Westlite Tuas is renewed subject to the terms of the renewal.

Important Information

This report is prepared and/or distributed by Phillip Securities Research Pte Ltd ("Phillip Securities Research"), which is a holder of a financial adviser’s licence under the Financial Advisers Act, Chapter 110 in Singapore.

By receiving or reading this report, you agree to be bound by the terms and limitations set out below. Any failure to comply with these terms and limitations may constitute a violation of law. This report has been provided to you for personal use only and shall not be reproduced, distributed or published by you in whole or in part, for any purpose. If you have received this report by mistake, please delete or destroy it, and notify the sender immediately.

The information and any analysis, forecasts, projections, expectations and opinions (collectively, the “Research”) contained in this report has been obtained from public sources which Phillip Securities Research believes to be reliable. However, Phillip Securities Research does not make any representation or warranty, express or implied that such information or Research is accurate, complete or appropriate or should be relied upon as such. Any such information or Research contained in this report is subject to change, and Phillip Securities Research shall not have any responsibility to maintain or update the information or Research made available or to supply any corrections, updates or releases in connection therewith.

Any opinions, forecasts, assumptions, estimates, valuations and prices contained in this report are as of the date indicated and are subject to change at any time without prior notice. Past performance of any product referred to in this report is not indicative of future results.

This report does not constitute, and should not be used as a substitute for, tax, legal or investment advice. This report should not be relied upon exclusively or as authoritative, without further being subject to the recipient’s own independent verification and exercise of judgment. The fact that this report has been made available constitutes neither a recommendation to enter into a particular transaction, nor a representation that any product described in this report is suitable or appropriate for the recipient. Recipients should be aware that many of the products, which may be described in this report involve significant risks and may not be suitable for all investors, and that any decision to enter into transactions involving such products should not be made, unless all such risks are understood and an independent determination has been made that such transactions would be appropriate. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or a complete discussion of such risks.

Nothing in this report shall be construed to be an offer or solicitation for the purchase or sale of any product. Any decision to purchase any product mentioned in this report should take into account existing public information, including any registered prospectus in respect of such product.

Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may provide an array of financial services to a large number of corporations in Singapore and worldwide, including but not limited to commercial / investment banking activities (including sponsorship, financial advisory or underwriting activities), brokerage or securities trading activities. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may have participated in or invested in transactions with the issuer(s) of the securities mentioned in this report, and may have performed services for or solicited business from such issuers. Additionally, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may have provided advice or investment services to such companies and investments or related investments, as may be mentioned in this report.

Phillip Securities Research or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report may, from time to time maintain a long or short position in securities referred to herein, or in related futures or options, purchase or sell, make a market in, or engage in any other transaction involving such securities, and earn brokerage or other compensation in respect of the foregoing. Investments will be denominated in various currencies including US dollars and Euro and thus will be subject to any fluctuation in exchange rates between US dollars and Euro or foreign currencies and the currency of your own jurisdiction. Such fluctuations may have an adverse effect on the value, price or income return of the investment.

To the extent permitted by law, Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may at any time engage in any of the above activities as set out above or otherwise hold an interest, whether material or not, in respect of companies and investments or related investments, which may be mentioned in this report. Accordingly, information may be available to Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, which is not reflected in this report, and Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited to its officers, directors, employees or persons involved in the issuance of this report, may, to the extent permitted by law, have acted upon or used the information prior to or immediately following its publication. Phillip Securities Research, or persons associated with or connected to Phillip Securities Research, including but not limited its officers, directors, employees or persons involved in the issuance of this report, may have issued other material that is inconsistent with, or reach different conclusions from, the contents of this report.

The information, tools and material presented herein are not directed, intended for distribution to or use by, any person or entity in any jurisdiction or country where such distribution, publication, availability or use would be contrary to the applicable law or regulation or which would subject Phillip Securities Research to any registration or licensing or other requirement, or penalty for contravention of such requirements within such jurisdiction.

This report is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The products mentioned in this report may not be suitable for all investors and a person receiving or reading this report should seek advice from a professional and financial adviser regarding the legal, business, financial, tax and other aspects including the suitability of such products, taking into account the specific investment objectives, financial situation or particular needs of that person, before making a commitment to invest in any of such products.

This report is not intended for distribution, publication to or use by any person in any jurisdiction outside of Singapore or any other jurisdiction as Phillip Securities Research may determine in its absolute discretion.

IMPORTANT DISCLOSURES FOR INCLUDED RESEARCH ANALYSES OR REPORTS OF FOREIGN RESEARCH HOUSE

Where the report contains research analyses or reports from a foreign research house, please note:

  1. recipients of the analyses or reports are to contact Phillip Securities Research (and not the relevant foreign research house) in Singapore at 250 North Bridge Road, #06-00 Raffles City Tower, Singapore 179101, telephone number +65 6533 6001, in respect of any matters arising from, or in connection with, the analyses or reports; and
  2. to the extent that the analyses or reports are delivered to and intended to be received by any person in Singapore who is not an accredited investor, expert investor or institutional investor, Phillip Securities Research accepts legal responsibility for the contents of the analyses or reports.
Subscribe
Notify of
guest
0 Comments
Inline Feedbacks
View all comments

About the author

Profile photo of Jeremy Teong

Jeremy Teong
Investment Analyst
Phillip Securities Research Pte Ltd

Jeremy covers primarily the Banking and Finance sector. He has 6 years’ experience in equities related dealing and research roles.

He graduated with Bachelors of Mechanical Engineering from Nanyang Technological University.

Get access to all the latest market news, reports, technical analysis
by signing up for a free account today!