• Still BUY with higher SGD0.69 TP from SGD0.64, 28% upside and c.5% FY24F yield. We stay positive on Centurion Corp and see growth driven by higher bed capacity, occupancy, and rental rates. CENT is in a sweet spot for purpose built workers’ accommodation (PBWA) in Singapore, where demand for foreign workers outstrips dormitory bed supply. The stock currently trades attractively at -1SD from its mean P/E, ie below its 9-year historical mean. Our TP is based on 7.5x blended FY24F-25F P/E.

• 1Q24’s revenue slightly ahead. CENT’s latest disclosure on 1Q24 saw revenue grow 30% YoY to SGD61m, outperforming our estimates slightly. Topline was driven by positive rental reversions and better occupancies in PBWA and purpose built student accommodation (PBSA) properties. Geographically, there was sustained demand for both PBWA and PBSA assets, which saw Singapore delivering 37% YoY revenue growth to SGD42m, Australia’s revenue growing by 25% YoY to SGD4m, and UK’s revenue at SGD10m with 28% YoY growth. Meanwhile, Malaysia’s revenue was flat at SGD5m. The slight outperformance was largely due to better- than-expected overall occupancies and bed rates. Singapore and Malaysia’s PBWA occupancies reached 99% and 96%, while UK and Australia’s PBSA occupancies reached 99% and 90%, all of which outpaced our expectations. Singapore was supported by high demand, UK was lifted by shortage in PBSA supply, and Australia was buoyed by strong student arrivals last year.

• Raise FY24F-26F earnings by c.5%. As CENT’s 1Q24 occupancy and bed rates have marginally outpaced our assumptions, we now impute higher bed and occupancy rates into forecasts. Consequently, our FY24F-26F earnings are increased by c.5%. Our TP is raised by 8%, a tad higher than the earnings revision, after rolling over our valuation from FY24F P/E to blended FY24- 25F P/E.

• Still positive on CENT’s outlook. We like CENT for being well-positioned to yield better rental rates in Singapore due to the dormitory supply shortage situation, and higher occupancy in Malaysia, as its increasing number of foreign workers are to be housed in purpose-built dormitories. These trends should continue to bode well for CENT. The group is also entering the Hong Kong market with its recent development – CENT has entered into a master lease agreement to refurbish a property unit into a 66-bed student accommodation facility.

• Key downside risks. Our earnings forecasts are premised on better occupancies at the company’s PBSA assets and bed rates. Failure to achieve these revenue drivers pose downside risks to our estimates.

• ESG. Our TP includes a 2% discount to the intrinsic value as per our in-house proprietary ESG methodology, as CENT’s ESG score of 3 (out of 4) is one notch below the country median of 3.1.

Source: RHB Research - 21 May 2024