• Centurion Corp (SGX:OU8) reported a strong 3Q21 with revenue up 20% y-o-y to S$35.3m, helped by its PBWA segment as occupancy and portfolio expansion both increased at a healthy clip. Its 9M21 revenue was stronger than expected at S$99.9m (+4% y-o-y), making up over 80% of our full-year 2021 estimates.
• As international travel progressively picks up in its key markets, we remain cautiously optimistic on the recovery of its PBSA assets and 2022 outlook. Maintain BUY.

Healthy Performance From the Main Revenue Driver..

• Singapore Purpose Built Workers’ Accommodation (PBWA), which contributed 63% of Centurion’s FY20 revenue, saw a 19% q-o-q boost in revenue from:
  1. the commencement of operations of three Quick Build Dormitory (QBDs) which currently enjoy healthy occupancies,
  2. two Migrant Worker Onboarding Centres, and
  3. fee income from accommodation-related or ancillary services.
• For 9M21, revenue rose 4.1% y-o-y as the PBWA segment compensated for the weakness in other segments.

...and Encouraging Signs of Recovery in Others

• The Purpose Built Student Accommodation (PBSA) segment saw its strongest recovery in the UK with revenue up 55% q-o-q, with occupancies improving as COVID-19 restrictions on international travel and on-campus programmes continue to be lifted.
• Tight border control measures continued to adversely impact occupancies in Australia. However, initial signs of a recovery should accelerate going forward as more Australians become fully vaccinated.

Commencement of More Than Half of 2021 Beds in 4Q21

• For 2021, Centurion had targeted 8,488 new Boulevard in Singapore, and capacity expansions in Westlite Tampoi and Westlite Pasir Gudang in Malaysia.

Outlook for Occupancy and Demand for Quality PBWA Remains Robust

• The outlook for PBWAs forecasts pending further disclosure of details.

Encouraging Signs for a Recovery in the PBSA Segment

• UK and US student South Australia are expected to gradually reopen to international students which will benefit Centurion in 2022.

Maintain BUY Rating on Centurion

• Maintain BUY rating on Centurion with a WACC of 6.5% and a terminal growth rate of 1.0%.

• Catalysts:
  • Full resumption of domestic and international flights.
  • Faster-than-expected easing of COVID-19 restrictions in Centurion’s key countries.

Source: UOB Kay Hian Research - 23 Nov 2021