Centurion

Centurion: 4Q net profit soared 171% y/y to $72.9m, bringing full year to $111.2m. Stripping fair value gains, PBT still improved 25.6% y/y from $20.9m in 4Q13 to $26.3m in 4Q14.

Top line revenue rose 74% y/y to $26.1m as both workers and student accommodation grew. Two-thirds of the growth is attributed to new contribution from highly-occupied student accommodation in Australia and UK (acquired in 1H14) and a third from improved occupancy rates in Singapore’s and Malaysia’s workers’ dormitories.

Gross profit margin expanded 4.3pp to 65.7%, due to economies of scale from increased bed capacity at Westlite Toh Guan, as well as hike in rental rates.

Share of profit from associates jumped $7.9m as Westlite Mandai recorded fair value gains of $7.8m and $0.1m higher operational profits.

Excluding fair value gains and profit from associates, core net profit amounts to $10.1m, 68% higher than $6.0m in 4Q13. Core net profit margin decreased to 38.7% from 40.2% due to student accommodation, which is more stable but has lower margin.

In view of the good results, management declared final dividend of 1¢ (vs FY13’s 0.6¢) bringing full year to 1.5¢

Although operational results are strong, the rather high gearing of 52% at Dec ’14 (vs 39% at Dec ’13) is a slight concern. The saving grace for now is its ability to generate positive free cash flow and high interest coverage ratio 10.1x excluding fair value gains.

Management remains positive on its business in 2015, citing stable demand in both workers and student accommodation. It also forecasts net absorption in workers’ accommodation in the next two to three years as leases of approx. 70,000 beds expire and workers are shifted to purpose-built dormitories.

The street has 3 Buys with TP between $0.83 and $0.85.