AmFraser Research, Jan 14
INITIATING coverage on Centurion with "buy", target price at S$0.808.
Centurion is one of the largest purpose-built workers dormitory operators in Singapore, with an estimated 12 per cent market share (19,726 beds) of a S$450 million industry.
In addition, it operates and is developing dormitory assets in Australia, Malaysia and Indonesia, and manufactures and sells optical disc media.
Singapore dormitory operators have benefited from steady rent increases (17 per cent compounded annual growth rate from 2007 to 2013) due to the overwhelming shortage of beds available (160,000 beds versus 759,000 foreign workers). Strict regulations by several government agencies restrict near-term supply, and the 55,000 beds in the pipeline by 2015 will not alleviate the supply/demand imbalance.
Going forward, we believe rents have further room for growth, as a steady pipeline of infrastructure projects such as the Thomson Line and Terminal 4 will require additional foreign workers to build. Thus, we believe Centurion's Singapore dormitories will continue to generate strong income flows on current attractive gross margins of circa 60 per cent.
In addition, we estimate its acquisition of RMIT Village, a student dormitory in Melbourne, Australia, will immediately contribute 8 per cent to topline, with further upside potential from the redevelopment of the adjacent carpark building and under-utilised common areas ...
BUY
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