Centurion

Centurion: Makes first foray into the Australian student accommodation business Worker dormitory provider, Centurion will acquire the RMIT Village and an adjoining car park building for a total purchase consideration of A$60m. The market may react positively to Centurion’s first foray into the student accommodation business, considering the attractive gross property yield, potential earnings accretion, and asset enhancement (AEI) options available to drive further growth. RMIT Village is located on the northern edge of Melbourne’s CBD, in close vicinity to RMIT University and the University of Melbourne. Sited on a 4,000 sqm freehold land parcel, the accommodation comprises 229 apartments and a current capacity of 456 beds. Typically, RMIT University reservations account for 70% of the total occupied beds annually. Occupancy at RMIT Village has been close to 100% in the past three years. In fact, the majority of its residences for 2014 stay are sold out, according to its website. The property will provide an estimated gross property yield of 13.6%, assuming the average per person weekly rate that ranges from A$272 to A$417. Furthermore, the existing student accommodation presents Centurion with asset enhancement opportunities to increase its bed capacity in the future. The adjoining car park building may also be redeveloped into new apartment buildings for university students and/or staff working in the healthcare industry in the vicinity. Slated for completion in early 2014, the proposed acquisition is expected to be earnings accretive, and is in line with Centurion’s business strategy to expand its scope of business and further grow its regional presence. The investment will be funded with proceeds raised from an Oct Medium Term Notes issue Oct and bank borrowings. Centurion currently owns eight worker accommodation assets spread out across Singapore and Malaysia with a total bed capacity of over 30,000 beds. At $0.55, the counter trades at 1.6x P/B, 19.4x annualized 3Q13 P/E.