Centurion

Centurion: OSKDMG intiaites coverage with TP $0.82. The house notes that Centurion is the only listed dormitory operator in Singapore via an RTO in 2011. By FY16, its portfolio will expand 60% to an estimated 54,000 beds. Last year’s riots in Little India highlighted the shortage of dormitories and the dire need for more such purpose-built accommodation. The company, endowed with an ability to generate cash, is actively looking for potential acquisitions. In 2013, about 760k foreign workers were in need of accommodation but there were only 160k purpose-built dormitory beds – with just 40k beds expected to be added to the supply by the end of this year. This acute supply shortfall, coupled with the limited land for dormitories land released by the Building Construction Authority (BCA)/Jurong Town Corp (JTC) over the years, will continue to ensure high occupancy for such accommodation as well as bed rental rates. The house expect a 36% core earnings CAGR from FY13-16, based on management’s estimates of: i) a 60% expansion in bed capacity by 2015, ii) a 5-10% annual increase in rental rates, iii) 8% growth in revenue from the student accommodation business. Gross margins at the company’s Singapore foreign workers’ dormitory and Australian student accommodation business are also expected to remain high - at above 60% and 40% respectively. The group announced its foray into the student accommodation business through the acquisition of land in Port Hedland, Western Australia and RMIT Village in Melbourne. It also plans to expand into other regions of Australia and the UK. The company is also actively seeking to expand its dormitories in existing territories as well as other Asean countries. One example is the recent expansion of its workers’ dormitory business into Indonesia.