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Centurion Corp - Checking Out The Competition

kiasutrader
Publish date: Thu, 13 Feb 2014, 12:00 PM
Centurion  has  completed  its  acquisition  of  RMIT  Village  as  well  as added  new  beds  to  its  students  dormitories.  By  FY15,  its  workers dormitory portfolio  is expected to  expand  60% to an estimated 54,000 beds.  Recently,  its  rival  MES  Group  opened  a  new  dormitory  in Singapore called  The Leo. Our channel checks  reveal  that  demand has been robust and The Leo  may be fully  taken up by  month-end. Maintain BUY, with a SGD0.82 TP.
  • The Leo likely to be  fully  taken up by end-February.  MES Group has launched a new workers  dormitory  in  Kaki Bukit called The Leo,  which has a capacity of over 3,600 beds and a rate of SGD320 per bed/month ->10%  higher  than  Centurion's  current  average  bed  rate.  The  new dormitory  has  seen  robust  demand  and  is  expected  to  hit  100% occupancy  at  the end of February  -  merely  2-3 weeks after its launch. This further highlights the  acute shortage of supply  as well as the strong demand  for  workers  dormitories  in  Singapore  -  which  will  benefit dormitory owners like CENT.
  • Completes  RMIT  Village  acquisition.  On  10  Feb,  Centurion  officially completed its acquisition of RMIT Village, which is expected to contribute about SGD7.5m  -  or 9%  -  of  the group's  FY14  revenue.  The revenue  to be  derived  would  be  similar  to  that  from  its  dormitory  business,  which contributes a consistent monthly cash flow. The company's management is  also  actively seeking opportunities in other parts of Australia and the UK with the aim of expanding its student accommodation business.
  • Maintain BUY,  with DCF-derived TP of SGD0.82.  Based on our DCF valuation and assuming  a WACC of 7.5%, we derive a TP of SGD0.82, which provides a  potential upside  of 40%. With  Centurion  management actively looking  for new acquisitions and  the company having allocated SGD260m  in  capex for  its  expansion plans,  we anticipate  its  growth  to increase further from hereon.



SWOT Analysis


Company Profile
Centurion Corporation is the only listed dormitory operator in Singapore. Upon completion of upgrading and development works,  the group's accommodation portfolio will grow to a total of about 54,000 beds. It also recently ventured into the student accommodation
business via the acquisition of RMIT Village.

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