Friday, 28 March 2014

Centurion Corporation

DMG & Partners Research, Mar 27

WE brought a group of fund managers to visit Centurion Corp's two dormitories, namely Toh Guan and Mandai - a joint venture with Lian Beng.
We were pleasantly surprised with the good facilities, comfortable living environment, and provision of welfare and social activities in the dorms which reaffirm Centurion's "managing with a heart" motto and separate them from peers'/factory-converted dorms.
A 100 per cent occupancy level is expected by June 2014. Based on our estimates, Centurion Corp's new block in Toh Guan - which has just started operation early this year - has reached a 50 per cent occupancy rate while its Mandai dormitory has achieved over 90 per cent. According to management, full occupancy will most likely be achieved within the next two to three months.
Potential new projects in Singapore, Penang and Qatar: The Building and Construction Authority and the JTC Corp have just put up two new dormitory land parcels for tender: a six-year 2,000-bed one in Mandai, and a 20-year 9,200-bed one in Tuas. In addition, Centurion is still awaiting the upcoming tender results from a 25,000-bed workers village in Penang, Malaysia and a 20,000-bed workers accommodation in Qatar.
These potential new projects, coupled with any further new land releases by the Singapore government, will provide additional boost to its workers accommodation segment.
We continue to like Centurion's strong operating cash flow generation, growth prospects, and high gross margins of more than 50 per cent. Its core earnings are expected to remain strong with a 54 per cent growth for FY2013-2014, driven by its Mandai dormitory project as well as a more than 4,000-bed expansion for its Toh Guan dormitory, which is on track to obtain full occupancy.
On top of that, Centurion is also expected to rake in a one-off $14.4 million gain from an industrial ramp-up project - M-Space. Therefore, we maintain our "buy" call, with a DCF-backed TP of 82 cents.

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