Centurion Corporation Limited: Unlocking Value Through Asset Monetization
Lim & Tan Securities | 12 March 2025
Centurion Corporation Limited: Riding the Wave of Strong Dormitory Demand
Centurion Corporation Limited, a leading provider of purpose-built workers and student accommodation, has delivered a stellar performance in FY24, with revenue and core profits exceeding expectations. The company’s revenue rose 22% year-over-year to S$253.6 million, driven by high financial occupancies and positive rental reversions across both its worker and student accommodation segments. 1
Gross profit grew by a robust 30% to S$195.6 million, supported by higher rental rates and operational efficiencies. Excluding net fair value gains of S$219.1 million, Centurion’s core profit for FY24 came in at S$99.3 million, an impressive 43% increase from the previous year. 1
Unlocking Value through Asset Monetization
One of the key highlights of Centurion’s performance is the potential for value-unlocking through the recycling of its mature assets. Over the past 2-3 years, the company’s purpose-built workers accommodation (PBWA) and purpose-built student accommodation (PBSA) assets have seen significant capital appreciation due to strong rental reversions and high occupancy rates. 2
In 2024 alone, Centurion recorded fair value gains of S$219.1 million (excluding fair value gains from its 45%-owned Westlite Mandai PBWA). The company is now exploring opportunities to crystallize these gains and redeploy the capital to further grow its portfolio of assets under management. 2
For instance, in December 2023, Centurion conducted a sale and leaseback of two of its Malaysia worker accommodation assets with a public sector pension fund for a total consideration of around S$65.2 million. In return, Centurion will lease back the properties for a period of fifteen years. 2
Furthermore, Centurion is actively considering a REIT listing involving some of its PBWA and PBSA assets. This move could unlock value for shareholders through a potential dividend in specie of REIT units. With more stabilized assets compared to 2015, when Centurion previously deferred its REIT plans, the company is now well-positioned to execute this strategy. 2
Robust Bed Pipeline and Favorable Market Dynamics
Centurion’s pipeline of new beds over the next two years is healthy, with around 9,700 beds across all segments, representing a 14% increase in its current capacity. This growth is supported by strong demand for foreign workers in Singapore, as the country’s construction demand is expected to remain high in the coming years. 3
The Building and Construction Authority (BCA) projects total construction demand to range between S$47 billion and S$53 billion in 2025, exceeding the 2024 level of S$44.2 billion. Construction demand is then expected to remain in the range of S$39 billion to S$46 billion per year from 2026 to 2029. 3
Centurion is well-positioned to capitalize on this trend, with 6 out of its 8 Malaysia dormitories located in Johor, which will benefit from the upcoming Johor-Singapore Special Economic Zone (JS-SEZ). This initiative aims to bridge trade, investments, and knowledge between the two countries, attracting foreign direct investment and driving demand for worker accommodation. 3
Attractive Valuation and Recommendation
Despite Centurion’s strong performance and growth prospects, the company’s valuation remains attractive at 7.9x forward P/E and 0.73x P/B. 4
The research analysts at Lim & Tan Securities have upgraded their recommendation on Centurion to “Accumulate” with a higher target price of S$1.20 (previous TP: S$0.83). The analysts have raised the target multiple from 7.1x FY25F P/E to 9.5x (+1SD historical average) in view of the expected earnings growth and potential catalysts from asset monetization. 5
With Centurion’s strategic shift towards an asset-light model, the potential for value-unlocking through asset recycling, and the favorable market dynamics, the company appears well-positioned to sustain its growth trajectory and deliver value for shareholders.
