Broker Name: CGS International
Date of Report: May 15, 2025
Centurion Corporation Ltd: Cautiously Optimistic Outlook and Potential REIT Issuance
Centurion’s Strong 1Q25 Performance
Centurion Corporation Ltd (CENT) reported a strong first quarter for 2025, with revenue growing by 13% year-over-year. This growth was primarily driven by robust financial occupancies and positive rental reversions in Singapore. The Purpose-Built Worker Accommodation (PBWA) business, particularly in Singapore, was the key revenue driver, experiencing a 15% year-over-year increase. CGS International reiterates an Add rating for CENT, anticipating that the company will benefit from favorable industry dynamics amid ongoing regulatory reforms aimed at improving migrant worker housing standards. [[1]]
Revenue Analysis
* 1Q25 revenue increased by 13% year-over-year to S\$69 million.
* This figure represents 25% of CGS International’s and Bloomberg consensus FY25F revenue forecasts, aligning with expectations.
* The PBWA segment’s revenue rose by 15% year-over-year to S\$53 million, attributed to high financial occupancies (99%) in Singapore and positive rental reversions across the group’s PBWA assets.
* Singapore’s PBWA revenue specifically increased by 17% to S\$49 million.
* In Malaysia, however, revenue saw a slight decline of 1% to S\$5 million due to lower financial occupancy (82%), although this was partially offset by positive rental reversions and a stronger Ringgit against the Singapore dollar.
* Short-term challenges were noted in Malaysia due to caps on foreign worker supply, affecting employers’ ability to recruit new workers.
* The Purpose Built Student Accommodation (PBSA) segment experienced a more modest growth of 2% year-over-year, reaching S\$15 million. This slower growth was attributed to a weaker Australian dollar versus the Singapore dollar and delays in student arrivals in Australia, influenced by international student visa management measures. [[1]]
Development Pipeline Overview
Centurion has several key development plans in progress:
* PBWA:
* The addition of 1,764 beds at Westlite Toh Guan by 4Q25F.
* 3,696 beds at Westlite Mandai by FY26F.
* PBSA:
* A 732-bed PBSA in Sydney expected by 4Q25F.
* Redevelopment of a car park into a 600-bed PBSA block by FY26F. [[1]]
Investment Thesis: Reiterate Add Rating
CGS International maintains an Add rating for Centurion, emphasizing the company’s position to capitalize on favorable industry dynamics driven by regulatory reforms aimed at enhancing migrant worker housing standards. The target price has been raised to S\$1.46, based on a blended valuation that includes:
* 8.4x CY26 P/E
* 25% discount to RNAV
The narrower RNAV discount reflects the company’s public announcement of moving forward with capital recycling plans, potentially including a REIT issuance. While the blended valuation basis remains unchanged, the target price increases due to raised revenue forecasts, reflecting the latest projected bed capacity. [[1]]
Potential Catalysts and Risks
* Re-rating catalysts:
* Continued strong rental reversion.
* Successful execution of its capital recycling strategy.
* REIT Plans: Management is targeting a potential REIT comprising worker accommodation and student accommodation assets in 2H25F, if feasible.
* Consideration of a dividend in species of some of the units in the proposed REIT held by the company to shareholders.
* Downside risks:
* A steeper increase in financing costs.
* Lower bed capacity utilization due to increased supply. [[1]]
Key Financial Metrics and Forecasts
CGS International provides updated financial forecasts for Centurion Corporation:
* FY25F EPS increased by 6.3%.
* FY26F EPS increased by 8.7%.
* FY27F forecasts are newly introduced. [[1]]
Peer Comparison and Market Data
* Current Price: S\$1.26
* Target Price: S\$1.46
* Up/downside: 15.9%
* CGSI / Consensus: 4.7%
* Market Cap: US\$816.8m (S\$1,059m)
* Average Daily Turnover: US\$1.44m (S\$1.92m)
* Current Shares o/s: 840.8m
* Free Float: 30.2%
*Consensus ratings: Buy 5 Hold 0 Sell 0 [[1]]
Major Shareholders
* Centurion Properties Pte Ltd: 50.6%
* Teo Peng Kwang: 7.6%
* David Loh Kim Kang: 5.3% [[1]]
Analyst Information
* William TNG, CFA
* T (65) 6210 8676
* E william.tng@cgsi.com [[1]]
Financial Summary
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|
Dec-23A |
Dec-24A |
Dec-25F |
Dec-26F |
Dec-27F |
| Total Net Revenues (S\$m) |
207.2 |
253.6 |
285.1 |
293.1 |
312.3 |
| Operating EBITDA (S\$m) |
123.6 |
161.6 |
180.0 |
183.8 |
193.8 |
| Net Profit (S\$m) |
153.1 |
344.8 |
107.8 |
113.2 |
120.4 |
| Normalised EPS (S\$) |
0.08 |
0.12 |
0.13 |
0.13 |
0.14 |
| Normalised EPS Growth |
21.3% |
43.4% |
8.5% |
5.1% |
6.3% |
| FD Normalised P/E (x) |
15.30 |
10.67 |
9.83 |
9.35 |
8.80 |
| DPS (S\$) |
0.025 |
0.035 |
0.038 |
0.040 |
0.043 |
| Dividend Yield |
1.98% |
2.78% |
3.05% |
3.21% |
3.41% |
| EV/EBITDA (x) |
12.51 |
9.03 |
8.14 |
7.79 |
7.18 |
| P/FCFE (x) |
14.49 |
23.62 |
17.69 |
11.35 |
10.19 |
| Net Gearing |
66.9% |
43.3% |
41.3% |
36.7% |
32.0% |
| P/BV (x) |
1.28 |
0.92 |
0.86 |
0.81 |
0.76 |
| ROE |
9.2% |
10.0% |
9.1% |
8.9% |
8.9% |
| % Change In Normalised EPS Estimates |
|
|
6.31% |
8.72% |
|
| Normalised EPS/consensus EPS (x) |
|
1.00 |
0.83 |
0.73 |
|
