Centurion

Centurion: Core 2Q14 net profit rose 62% to $7.5m on revenue of $19.9m (+41%). The stellar top-line was led by a 56% growth in revenue from the accommodation business, stemming from the increase in bed capacity at Westlite Toh Guan dormitory and maiden revenue from the group’s student accommodation RMIT Village (RMITV) in Melbourne, Australia. Revenue gain from the accommodation business was offset partly by a 22% drop in revenue from the optical disc business to $2.1 due to continued reduced market demand for physical optical disc storage media. Gross margins improved to 65.5% from 55.5%, as a result of higher revenue contribution from the accommodation business, which generally commands higher margins. Bottom-line was partly weighed by a 41% rise in admin expenses to $3.2m due to higher salary costs and professional fees, and a 406% rise in finance expenses to $1.8m as a result of interest expenses incurred for medium term notes issued in Oct ’13. Going forward, supported by healthy demand and a more diversified portfolio of workers and students accommodation across the region, Centurion guides that the outlook for its Accommodation business remains favourable. The group will explore selected acquisition opportunities both in Singapore and overseas as and when the opportunities arise. Meanwhile, the operating environment for the group’s Optical Disc business remains difficult as the market demand for physical optical storage media is weak. Faced with falling demand, Centurion will continue to focus on controlling cost and carry out the necessary restructuring to ensure that the business continues to generate positive cash flow. At the current price, Centurion trades at 1.63x P/B with a gearing ratio of 46%.