Tuesday, November 15, 2016


Centurion's 3Q16 net profit rose 6% to $7.8m, bringing 9M16 earnings to $26m (-2%), or 73% of full year consensus estimate.

For the quarter, revenue climbed 14% to $28.1m, boosted by 18% increase in accommodation segment, due to ramp-up at Weslite Woodlands (TOP: Jul '15, occupancy 75%) and maiden contributions from ASPRI-Westlite Papan (TOP: May '16, occupancy: 20%). This was offset by reduced contributions from its optical disc business.

Gross margin shrank 6ppt to 60%, hurt by operating loss at ASPRI-Westlite Papan. Bottom line was also weighed by higher finance cost of $5.7m (+23%), due to increased borrowings to finance ASPRI-Weslite Papan, as well as UK Braemar.

Net gearing was steady q/q at 54%.

Centurion currently has 22 worker and student dormitories, totalling 64,408 beds across four countries.

In Singapore, Centurion has managed to maintain above-average occupancy rates despite a slowing economy, particularly in the O&M sector. It is currently in the midst of extension discussions with authorities, regarding Westlite Tuas (expiry: Apr '17).

In Nov, its appeal to increase bed capacity at Westlite Toh Guan has been rejected by URA. Accordingly, capacity at the dormitory will be reduced by 808 beds. This would result in a maximum impact of up to $2m/year or 5.9% of FY15 net profit.

In Malaysia, the government had showed signs of relaxing the foreign labour hiring freeze in certain sectors, including manufacturing. Although management acknowledges a challenging outlook, it is optimistic of long term prospects.

Management is sanguine about the prospects of its student accommodation business, and now has 10 student dormitories across UK, Australia and Singapore, following the acquisition of four assets in Jul '16. Despite the Brexit outcome, its UK accommodation assets are operating at close to full occupancy.

Centurion is currently trading undemanding 6.8x FY16E consensus P/E and 0.6x P/B. The street also sees a 6% indicative yield for the counter.

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