Introduction
UOB Kay Hian has released a comprehensive research report on Centurion Corp (CENT SP), one of the largest providers of purpose-built workers’ accommodation in Singapore and Malaysia, with a growing exposure to student accommodation in Hong Kong, the UK, and Australia. The report details impressive financial results, strong operational performance across diverse asset classes, and an engaging outlook built on clear market trends. In this deep dive, every nuance and significant detail from the report is explored to provide online financial professionals with a complete picture of Centurion Corp’s performance, strategy, and valuation.
Company Overview
Centurion is strategically positioned in the real estate sector under the GICS classification. It boasts a robust portfolio in purpose-built workers’ accommodation (PBWA) across Singapore and Malaysia, complemented by targeted ventures into the Purpose Built Students’ Accommodation (PBSA) market in Hong Kong, the UK, and Australia. With a market capitalization of S\$798.7 million (approximately US\$592.6 million) and 840.8 million shares issued, the company has garnered significant attention with its stable trading metrics and attractive valuation multiples.
Operational Performance & Earnings Highlights
Strong Revenue & Earnings Growth
Centurion Corp has demonstrated solid financial strength with key metrics showing considerable improvements from 2023 to 2024. The report highlights several important results:
- Revenue Increase: Revenue increased by 22.4% from S\$207.2 million in 2023 to S\$253.6 million in 2024, underscoring robust rental reversions across both PBWA and PBSA segments.
- Gross Profit Improvement: Gross profit rose from S\$150.0 million to S\$195.6 million, marking an impressive 30.4% increase, accompanied by a notable 4.7 percentage point expansion in the gross margin.
- Core Net Profit: Core net profit, excluding fair value gains, climbed by 45.2% to reach S\$111 million, even as fair value gains on investment properties contributed an additional boost, driving the PATMI increase by 125% year-on-year to S\$345 million.
Fair Value Gains Impact
A key contributing factor to Centurion’s higher-than-expected earnings in 2024 was the net fair value (FV) gains amounting to S\$219 million. Despite the significant boost from these gains, the core operational profitability remains strong, with evidential positive rental reversions during lease renewals. The balance sheet has also seen a strengthening, with the net debt declining by 8% to S\$534 million at the end of 2024.
Segment Performance & Market Dynamics
Purpose Built Workers’ Accommodation (PBWA)
The PBWA segment continues to drive impressive segmental performance. Key points include:
- Revenue and Profit: The segment saw a 24% year-on-year growth in revenue and a 32% increase in profit, fueled by robust rental revisions in Singapore. Short-term leases have been renewed at higher prevailing rents, capitalising on supply-demand imbalances.
- Favourable Macro Trends: The Building & Construction Authority of Singapore forecasts elevated construction spending through 2029, ensuring that the macro backdrop remains supportive for Centurion.
Purpose Built Students’ Accommodation (PBSA)
The PBSA business in the UK and Australia has also performed remarkably, even amid global slowdown and increased regulatory scrutiny:
- Occupancy Rates: Occupancy in the UK rose to 98%—a 5 percentage point increase—while Australian properties surged to 96% with an 8 percentage point jump, demonstrating strong domestic demand amid an inadequate pipeline of new beds.
- Outlook: Industry forecasts predict a significant shortfall in the UK student accommodation market, with the deficit expected to reach 620,000 beds by 2029, offering future growth potential.
Dividend Policy and Capital Management
Centurion Corp maintained its dividend payout momentum into 2024. The company declared an interim dividend of S\$0.015 per share and a final dividend of S\$0.02, resulting in a total dividend per share (DPS) of S\$0.035. This total was slightly above the estimated S\$0.03, translating to an approximate yield of 3.0% based on the latest closing price. For 2025, the payout ratio is expected to remain at 30%, reinforcing the company’s commitment to rewarding shareholders.
Valuation & Recommendation
UOB Kay Hian has maintained a “BUY” recommendation on Centurion Corp. The report establishes a higher PE-based target price of S\$1.16 (up from S\$1.11 previously), applying a target PE multiple of 8.7x. This multiple is 0.5 standard deviations above Centurion’s long-term average PE of 6.9x (excluding the COVID-affected 2019). Analysts consider the current trading multiples—8.6x for 2025 estimated PE and 0.8x for the P/B ratio—to be very attractive. Additionally, further upside could be unlocked if the target PE multiple is raised to 10.6x, which would see the target price increase to S\$1.42.
Strategic Initiatives and Growth Projects
Centurion Corp is actively working to unlock more shareholder value. Key initiatives include:
- REIT Spin-Off: Management is exploring the possibility of spinning off some of its PBWA and PBSA assets into a REIT. The proposed spin-off is anticipated to enhance investor sentiment by unlocking latent value and could even involve a dividend in specie.
- Capital Recycling & Expansion: Additional capital recycling efforts, along with potential capacity expansions through joint ventures (JVs), could support a transition towards a more asset-light and capital-efficient business model.
As part of its growth blueprint, Centurion Corp is also tracking key metrics in its expansion plan around key markets such as Singapore, Malaysia, Hong Kong, the United Kingdom, and Australia. The report details various units across projects indicating a strong pipeline in both the PBWA and PBSA segments.
Financial Overview & Projections
Income Statement & Key Metrics
The report cites impressive growth trends and a structured outlook for the next few years. With net turnover forecasted to grow gradually, details include:
- 2024 to 2027 Earnings Trends: Net turnover is expected to rise from S\$233 million to S\$285 million, while EBITDA and operating profit figures reflect a balanced trajectory despite the underlying economic dynamics and the impact of fair value adjustments. Notably, the 2024 core net profit excluding fair value gains was S\$111 million.
- Profitability Ratios: The EBITDA margin remains healthy, though there is a rounding realignment across the forecast years. Pre-tax and net margins also show upward trends into 2027, underlining operational efficiency improvements.
Balance Sheet and Liquidity
Centurion’s balance sheet remains a strong pillar as detailed in the report, with total assets growing steadily and a notable reduction in net debt. The improvement in the net debt/equity ratio to 0.3x from 0.4x in the previous year, along with a stable average long-term debt maturity profile of six years, signals a space for further operational maneuvering.
Cash Flow Analysis
The company shows healthy cash flow dynamics. In 2024, operating cash inflows totaled S\$123 million. The report underscores controlled capex requirements and effective working capital management. With an increasing trend in net cash inflows, the ending cash and cash equivalents on the balance sheet improved from S\$83 million in 2024 to S\$309 million by 2027, thereby shielding the company against potential market fluctuations.
Conclusion
In summary, Centurion Corp’s performance stands on solid operational fundamentals built around diverse accommodation segments, bullish rental adjustments, and strategic capital management initiatives. With a sturdy balance sheet, enticing dividends, and a planned REIT spin-off, the company is deemed highly attractive based on current valuation metrics. UOB Kay Hian’s “BUY” recommendation, along with an upwardly revised target price of S\$1.16, reinforces the positive long-term outlook for Centurion Corp. The company’s growth prospects, especially in the face of dynamic macro trends in Singapore and robust demand in international markets for student accommodation, make it a compelling proposition for investors looking at the real estate sector.
For further analysis and detailed insights on market-specific growth drivers and financial projections, readers are encouraged to review the complete UOB Kay Hian research report.
