Centurion Corporation Unveils Dividend In Specie of CAREIT Units – Major Corporate Action with Shareholder Impact

Key Highlights of the Announcement

• Centurion Corporation Limited (CCL) proposes a dividend in specie to distribute up to 84,077,862 units in Centurion Accommodation REIT (CAREIT) to its shareholders, representing approximately 4.9% of CAREIT’s total issued units.
• This distribution will be on a pro rata basis to CCL shareholders, with an illustrative ratio of one CAREIT Unit for every ten CCL Shares held.
• Post-distribution, CCL will remain the largest unitholder of CAREIT with an estimated 37.9% stake, ensuring continued alignment with the REIT’s growth and direction.

Strategic Rationale and Potential Share Price Impact

• Tax Transparency Benefits: Individual Singaporean shareholders should not be subject to tax on CAREIT distributions. Qualifying non-resident non-individuals will benefit from a reduced 10% final withholding tax on specified income.
• Unlocking Shareholder Value: This move is a key part of CCL’s asset-light growth strategy, enabling investors to directly participate in the growth trajectory of Singapore’s only pure-play purpose-built accommodation REIT, with exposure to the Singapore worker accommodation and UK/Australia student accommodation markets.
• Enhanced Liquidity and Public Float: The distribution will broaden CAREIT’s investor base and improve its public float and trading liquidity—potentially positive for both CCL and CAREIT valuations.
• Financial Effects: The pro forma effects indicate a modest reduction in CCL’s net tangible assets (NTA) per share from S\$1.47 to S\$1.38, and a slight decrease in FY2025 earnings per share from 13.65 to 13.59 Singapore cents—neutral to slightly negative in the short term, but with potential long-term strategic benefits.
• CAREIT’s Strong Portfolio: CAREIT owns 15 quality properties across Singapore, the UK, and Australia, with a portfolio value of S\$1.5 billion, FY2025 revenue of S\$50.7 million, and net profit before tax of S\$10.7 million.

Important Details for Shareholders

• Distribution Details: The exact distribution ratio will be confirmed closer to the record date. As of now, it is expected to be one CAREIT Unit for every ten CCL Shares held (fractional entitlements disregarded).
• Entitlement: Only shareholders on the register as at the upcoming record date (to be announced) will be eligible.
• Dividend Source: The distribution will be appropriated from CCL’s retained profits and classified as a one-tier dividend in specie.
• Share Capital Unchanged: The action will not alter the number of CCL shares in issue or individual shareholder holdings in CCL.
• Odd Lots: CAREIT Units trade in board lots of 100, but odd lots can be traded on the SGX-ST Unit Share Market. However, odd lot liquidity may be low and trading costs higher.
• Overseas Shareholders: For compliance reasons, overseas shareholders may have their entitlements sold on their behalf, with net proceeds remitted to them. Further details will be in the upcoming circular.
• Conditionality: The distribution is subject to shareholder approval at the upcoming AGM and necessary regulatory consents.
• Lock-up Arrangements: Existing lock-up agreements do not prohibit this dividend in specie, provided internal transfers retain lock-up compliance.
• Directors’ and Substantial Shareholders’ Interests: Key directors and substantial shareholders collectively hold significant stakes in both CCL and CAREIT, underscoring their alignment with the company’s strategic direction.

What Investors Should Watch For

• AGM Approval: The proposal’s completion is conditional on shareholder approval. Investors should expect further communication and are advised to await the official circular before taking action.
• Strategic Implications: This is a notable move towards capital recycling, asset-light strategy, and unlocking shareholder value, which could have a significant medium-to-long term impact on CCL and CAREIT’s share/unit prices.
• Investor Participation in CAREIT: CCL shareholders will soon directly participate in CAREIT’s future performance, including income distributions and capital appreciation.
• Market Reaction: As a significant corporate action affecting both CCL and CAREIT, the news could be price sensitive and may move share and unit prices upon further announcements and completion.

Next Steps

CCL will circulate a formal shareholder circular with comprehensive details, including the record date and AGM notice. Investors are strongly advised to review this document once available and consult with their financial advisers before making investment decisions.

Disclaimer: This article is for informational purposes only and does not constitute financial advice or an offer to buy or sell any security. Investors should consult the official company circular and seek professional advice before making investment decisions. The information herein is based on documents available as of the date of publication and may be subject to change.

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