KGI Securities covering the report.

April 11, 2025

Centurion Corp Ltd: REIT Listing Exploration and Strong Growth Potential

Centurion Corp Explores REIT Listing to Unlock Asset Value

Centurion Corp Ltd (CENT SP/OU8.SI) is exploring a potential REIT structure comprising stabilized Purpose-Built Workers’ Accommodation (PBWA) and Purpose-Built Student Accommodation (PBSA) assets in mature markets like Singapore, Malaysia, and the UK [[1]]. This strategic move could unlock asset value, enhance capital recycling, and deliver stable income for shareholders via a potential dividend-in-specie. The evaluation of a potential REIT listing represents a transformative step in its long-term strategy [[2]]. By spinning off mature, income-generating PBWA and PBSA assets in Singapore, Malaysia, and the UK, Centurion can unlock embedded asset value, recycle capital efficiently, and offer shareholders with a yield-focused investment vehicle.

• The REIT initiative would enable the Group to maintain balance sheet efficiency while meeting compliance and governance standards required for listing [[2]].
• A dividend-in-specie distribution of REIT units is under consideration as a shareholder reward, and over time, the REIT could become a platform for third-party asset injections [[2]].
• This mirrors strategies adopted by successful asset-light operators in Singapore and would position Centurion as a long-term REIT sponsor and manager [[2]].

Although no formal timeline has been disclosed, the potential REIT reflects strategic foresight that could drive valuation uplift, enhance return on equity, and improve shareholder returns [[2]].

Strong Financial Performance Driven by High Occupancy and Rental Growth

Centurion reported stronger-than-anticipated revenue growth, with total revenue rising 22% YoY to S\$253.6 million [[1]]. Net profit after tax surged 118% to S\$382.6 million, driven by high financial occupancy and rental rate uplifts across all key markets [[1]]. Revenue increased 18% YoY to S\$129.2 million from S\$109.3 million in 2H23, while gross profit grew 27% to S\$101.5 million, underpinned by sustained high occupancy and positive rental revisions [[1]].

Despite a slight dip in PBWA occupancy in Malaysia, attributable to short-term foreign worker caps, strong rental performance and high occupancy in key markets like Singapore, the UK, and Australia offset this temporary weakness [[1]]. Centurion declared a final dividend of 3.5 Scents per share for FY24, representing a 28.6% increase from the 2.5 Scents distributed in FY23 [[1]]. This reflects not only improved earnings but also the Group’s commitment to delivering higher shareholder returns.

Global Footprint Expansion and Development Pipeline

As of 31 December 2024, Centurion operated 69,929 beds across 37 assets with AUM of S\$2.5 billion [[1]]. It added 2,552 new beds and has 7,662 beds under development for 2025-2026, including a new PBSA in Macquarie Park, Australia [[1]].

Financial Strength and Prudent Debt Management

In FY24, the Group reduced its borrowings from S\$657.4 million to S\$623.5 million, leading to a significant decline in its net gearing ratio from 38% to 29% [[1]]. It closed the year with a healthy cash position of S\$89 million and access to S\$150.4 million in unutilised committed credit facilities, of which S\$133.9 million remain available beyond the next 12 months [[1]]. These liquid resources comfortably cover the Group’s net current liabilities of S\$63.4 million [[1]]. Centurion’s long-term bank financing model supports its income-generating and development assets, with an average debt maturity of six years helping to mitigate refinancing risk [[1]]. With a strong interest coverage ratio of 4.0x and a well-spread debt profile, Centurion is well-positioned to continue its investment and growth strategy [[1]]. A proposed share buyback mandate (up to 10% of the total number of issued shares), pending approval, further underscores management’s confidence in the Group’s intrinsic value and ability to deliver earnings-accretive returns [[1]].

Potential Impact from Tariffs and Macroeconomic Headwinds

While Centurion’s core operations are not directly affected by U.S. tariffs, it remains exposed to broader macroeconomic headwinds that could weigh on accommodation demand and investor sentiment [[1]].

Outperform Rating Maintained with Raised Target Price

KGI Securities maintains its OUTPERFORM rating with a raised target price of S\$1.38, driven by resilient occupancy and positive rental revisions, despite foreign exchange fluctuations [[1]]. Near-term tailwinds include high occupancy and rental reversion, while the medium-term outlook is bolstered by rising contribution from the BTR, AEI-enhanced portfolio and new properties [[1]].

Risks to this valuation include prolonged elevated interest rates, recessionary fear, policy shifts in key markets, currency volatility and global trade tensions impacting labour and student mobility [[1]].

Structural Demand Driving Resilient Accommodation Growth

Centurion is strategically positioned to capitalize on strong, structural demand for affordable, compliant accommodation across its core segments, Purpose-Built Workers’ Accommodation (PBWA) and Purpose-Built Student Accommodation (PBSA) [[2]]. In Singapore, ongoing regulatory reforms, including the Dormitory Standards 2040, are accelerating the shift toward high-quality PBWA operators [[2]]. Centurion is at the forefront of this transition with developments like Westlite Ubi [[2]]. In 2024, the Group secured lease extensions for all four of its Quick Build Dormitories (QBDs), reflecting sustained demand amid tight supply [[2]].

• While current PBWA supply has been increased to address immediate needs, demand is expected to rise in the near term due to an growing pipeline of large-scale construction projects [[2]].
• Over the mid-term, supply is anticipated to contract as operators retrofit existing capacity to comply with upgraded standards [[2]].
• Additionally, the number of Work Permit Holders in the Construction, Marine, and Process (CMP) sectors continues to grow annually, reinforcing long-term demand fundamentals [[2]].

The Group is also expanding in Malaysia, where stricter enforcement of Act 446 is institutionalizing demand for centralised labour quarters (CLQs) [[2]]. While there are near-term headwinds from the current 2.5 million foreign worker cap, industry groups are calling for higher quotas amid persistent labour shortages [[2]]. To capture future demand, Centurion is expanding its footprint with 870 new beds at Westlite Johor Tech Park and is exploring a large-scale 7,000-bed development in Nusajaya, Iskandar [[2]].

On the PBSA front, student housing remains undersupplied across key markets such as the UK and Australia, where elevated rental prices and housing shortages persist despite tighter student visa controls [[2]]. Australia has implemented visa caps and stricter requirements, while the UK restricting dependent visas and limiting students’ work rights [[2]]. In the UK, for example, CBRE projects a shortfall of over 620,000 PBSA beds by 2029, supporting strong rental growth and occupancy [[2]]. Similar pressures exist in Australia and Hong Kong, where Centurion is actively expanding through new developments and redevelopments [[2]]. Centurion’s active pipeline, including a new development in Macquarie Park, Australia, positions the Group to capitalise on this imbalance [[2]].

Across both segments, recurring income streams from, Centurion’s PBWA and PBSA assets generate stable recurring income through annual and semester-based contracts underpin revenue visibility, making Centurion’s portfolio resilient to macroeconomic and regulatory policy fluctuations [[2]].

Strategic Expansion, Portfolio Optimisation and Market Positioning

Centurion continues to evolve into a diversified, multi-segment accommodation provider, with strategic positioning across PBWA, PBSA, and its newest vertical, Build-to-Rent (BTR) [[3]]. This transformation reflects Centurion’s ability to respond to emerging market demands while optimizing its existing portfolio through disciplined capital allocation [[3]]. In FY24, the Group added 2,552 new beds, including new PBSA capacity in Hong Kong and PBWA expansions in Singapore and Malaysia [[3]]. Concurrently, it divested 858 beds in the US as part of a capital recycling strategy, allowing reinvestment into higher-growth opportunities [[3]].

Notably, Centurion entered the BTR segment through two joint ventures in Xiamen, China, in collaboration with City Home Apartments [[3]]. These projects, particularly Centurion-Cityhome Gaolin, will yield approximately 1,000 apartments, with around 400 units already secured under a 20-year master lease as of December 2024 [[3]]. This move positions Centurion to tap into China’s growing urban rental housing demand, particularly among young professionals and fresh graduates [[3]]. The Group also continues to implement AEIs across its mature PBWA and PBSA assets, driving occupancy and increasing rental yields [[3]]. Its geographic footprint across Singapore, Malaysia, the UK, Australia, Hong Kong SAR, and China provides strategic diversification and operational flexibility [[3]]. This broad presence enables Centurion to allocate capital efficiently based on market cycles, while its recently proposed share buyback program reflects management’s confidence in the Group’s intrinsic value and commitment to delivering shareholder returns through earnings accretion [[3]].

Robust Financial Discipline Enabling Sustainable Growth

Centurion’s financial resilience and prudent capital management provide a solid foundation for sustainable growth and strategic expansion [[4]]. In FY24, the Group made substantial progress in strengthening its balance sheet, reducing total borrowings from S\$657.4mn to S\$623.5mn YoY [[4]]. This strategic deleveraging resulted in a marked improvement in its net gearing ratio to 29%, down significantly from 38% in FY23 [[4]]. The Group also maintained a healthy cash position of S\$89mn, alongside S\$150.4mn in unutilised committed credit facilities, of which S\$133.9mn are available beyond the next 12 months [[4]]. These resources comfortably cover net current liabilities of S\$63.4mn, reflecting strong liquidity and operational flexibility [[4]].

Centurion continues to adopt a cautious approach to debt, relying on long-term bank financing for its income-generating assets and development projects [[4]]. Its average debt maturity profile of six years and regular principal repayments help mitigate refinancing risk and align funding with the long-term nature of its asset base [[4]].

With an interest coverage ratio of 4.0x and improving operating metrics, Centurion’s financial discipline supports both growth and shareholder returns [[4]]. In FY24, the Group increased its total dividend payout by 28.6% to 3.5 Singapore cents per share, delivering a yield of 3.6% [[4]]. In addition, a potential share buyback mandate to acquire issued shares in the capital of the company not exceeding 10% of the total number of issued shares has been proposed, if approved, this could further enhance shareholder value, especially given the company’s shares continue to trade at a discount to net asset value of S\$1.37 as of 31 December 2024, making buybacks earnings-per-share accretive [[4]].

Looking ahead, Centurion’s well-capitalized position and robust cash flow generation will allow it to continue investing in income-generating assets and high-growth development opportunities [[4]].

Company Outlook and Valuation

Centurion’s strong FY24 performance highlights its resilience and solidifies its long-term growth trajectory in the worker and student accommodation sectors [[5]]. Backed by stable demand drivers, continued expansion into the Build-to-Rent (BTR) segment, and disciplined financial management, the Group is well-positioned to sustain earnings growth [[5]]. Strategic initiatives such as the potential REIT listing and proposed share buyback further enhance its value proposition, particularly with shares currently trading below NAV [[5]]. For investors, Centurion presents an attractive opportunity to gain exposure to a defensive, cash-generative asset class with consistent returns [[5]].

Nonetheless, medium-term macroeconomic uncertainties remain [[5]]. Heightened global trade tensions and potential tariff escalations may weigh on Singapore’s growth outlook in 2025, with GDP forecasted at 1%-3% by the Ministry of Trade and Industry [[5]]. Despite these external risks, Centurion’s diversified portfolio, strong fundamentals, and prudent capital strategy should help cushion against volatility and support long-term shareholder value [[5]].

KGI Securities maintains its OUTPERFORM recommendation with a raised target price of S\$1.38, underpinned by Centurion’s strong FY24 performance, supported by higher-than-expected rental reversions across its PBWA and PBSA segments [[5]]. The target price is derived from a discounted cash flow (DCF) analysis, using a terminal growth rate of 2.0% and a WACC of 5.0% [[5]]. Notably, this valuation does not yet reflect potential upside from a successful REIT listing, which could serve as an additional catalyst for re-rating [[5]].

Financials & Key Operating Statistics

Key financial data and operating statistics for Centurion Corp Ltd are summarized below:

Revenue by geographical area

Trading Data

• Price as of 10 Apr 25 (SGD): 1.13
• 12M TP (\$): 1.38
• Previous TP (\$): 0.85
• Upside, incl div (%): 25.5%
• Mkt Cap (\$mn): 950
• Issued Shares (mn): 841
• Vol – 3M Daily avg (mn): 1.8
• Val – 3M Daily avg (\$mn): 1.9
• Free Float (%): 26.3%

Major Shareholders

• Centurion Properties Pte Ltd: 50.6%
• Loh Kim Kang: 9.2%
• Teo Peng Kwang: 7.6%

Total Foreign Workforce Numbers in Singapore

Strategic expansion, portfolio optimisation and market positioning. Centurion continues to evolve into a diversified, multi-segment accommodation provider, with strategic positioning across PBWA, PBSA, and its newest vertical, Build-to-Rent (BTR). This transformation reflects Centurion’s ability to respond to emerging market demands while optimizing its existing portfolio through disciplined capital allocation. In FY24, the Group added 2,552 new beds, including new PBSA capacity in Hong Kong and PBWA expansions in Singapore and Malaysia. Concurrently, it divested 858 beds in the US as part of a capital recycling strategy, allowing reinvestment into higher-growth opportunities. Notably, Centurion entered the BTR segment through two joint ventures in Xiamen, China, in collaboration with City Home Apartments. These projects, particularly Centurion-Cityhome Gaolin, will yield approximately 1,000 apartments, with around 400 units already secured under a 20-year master lease as of December 2024. This move positions Centurion to tap into China’s growing urban rental housing demand, particularly among young professionals and fresh graduates. The Group also continues to implement AEIs across its mature PBWA and PBSA assets, driving occupancy and increasing rental yields. Its geographic footprint across Singapore, Malaysia, the UK, Australia, Hong Kong SAR, and China provides strategic diversification and operational flexibility. This broad presence enables Centurion to allocate capital efficiently based on market cycles, while its recently proposed share buyback program reflects management’s confidence in the Group’s intrinsic value and commitment to delivering shareholder returns through earnings accretion [[3]].

Pipeline of total beds in portfolio and revenue generated

Robust financial disciple enabling sustainable growth. Centurion’s financial resilience and prudent capital management provide a solid foundation for sustainable growth and strategic expansion. In FY24, the Group made substantial progress in strengthening its balance sheet, reducing total borrowings from S\$657.4mn to S\$623.5mn YoY. This strategic deleveraging resulted in a marked improvement in its net gearing ratio to 29%, down significantly from 38% in FY23. The Group also maintained a healthy cash position of S\$89mn, alongside S\$150.4mn in unutilised committed credit facilities, of which S\$133.9mn are available beyond the next 12 months. These resources comfortably cover net current liabilities of S\$63.4mn, reflecting strong liquidity and operational flexibility. Centurion continues to adopt a cautious approach to debt, relying on long-term bank financing for its income-generating assets and development projects. Its average debt maturity profile of six years and regular principal repayments help mitigate refinancing risk and align funding with the long-term nature of its asset base. With an interest coverage ratio of 4.0x and improving operating metrics, Centurion’s financial discipline supports both growth and shareholder returns. In FY24, the Group increased its total dividend payout by 28.6% to 3.5 Singapore cents per share, delivering a yield of 3.6%. In addition, a potential share buyback mandate to acquire issued shares in the capital of the company not exceeding 10% of the total number of issued shares has been proposed, if approved, this could further enhance shareholder value, especially given the company’s shares continue to trade at a discount to net asset value of S\$1.37 as of 31 December 2024, making buybacks earnings-per-share accretive [[4]].

Looking ahead, Centurion’s well-capitalized position and robust cash flow generation will allow it to continue investing in income-generating assets and high-growth development opportunities [[4]].

Centurion’s Portfolio

Listed below is the updated list of properties in Centurion’s Portfolio [[6]].

Remarks: ^ – Centurion has completed sale and leaseback agreements with Kumpulan Wang Persaraan (Diperbadankan) (“KWAP”), a Malaysian public sector pension fund. The agreements are for 15 years for Westlite Bukit Minyak starting on 21 March 2024 and Westlite Tampoi starting on 5 September 2024 [[6]].