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Investing In Dorm Rooms – Long On Centurion?
Tradeable, Tradeable Ideas | 28 August 2014
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By: Raymond Leung
Articles (142) Profile
  1. Centurion’s 2Q14 performance showed starkly improved revenue. Stripping out one-time gains, net profit also grew from last year.
  2. Centurion boasts strong occupancy of about 90 percent for its dormitories. Only a small percentage of bed spaces are up for renewal in the next two years.
  3. The company intends to invest in student dormitories in the UK. Centurion is hoping that these investments will help bring a stable source of income.

Analysts updates on Centurion Corp

Recently, dormitory operator Centurion Corporation (CENT) took a hit after a news article suggested that there are high vacancy rates for dormitories in Singapore.

Digging into the recent financial results, we will determine if the sell down is warranted. Revenue of 2Q14 grew 41 percent from $14.1 million to $19.1 million but net profit fell by 86 percent from $56 million to $7.7 million.

This is due to the lack of fair value gain from CENT’s investment properties and the share of profit from the joint venture with Lian Beng that was accounted for in the previous quarter. Taking in account of the above, CENT managed to perform better than last year.

Despite the strong headwinds in the industry, CENT is well positioned to tide through this trying period. Occupancy of the group remains strong at approximately 90 percent with only a small percentage of bed spaces that will expire in two years.

CENT should be able to market them out well as their land cost is much lower than their competitors. This should giving CENT a distinctive price advantage.

CENT’s overseas dormitory will partially mitigate the tough operating environment in Singapore. Its foray into overseas student hostel is viewed positively as this will help diversify its business.

CENT is currently eyeing four more student accommodations in the United Kingdom (UK). These are located in Manchester and Liverpool. In the long run, student accommodation will be able to bring stable source of income to the group.

Centurion is looking to invest in student dormitories in the UK

Hostels under CENT are located within vicinity of popular universities such as University of Melbourne, Royal Melbourne Institute of Technology, University of Manchester and University of Liverpool. The prime locales of these hostels will help “guarantee” occupancy.

Analysts from OSK-DMG Research and DBS Vickers Research unanimously gave the group a “Buy” call as they believe that the recent sell down have brought value to investors. On average, CENT has a potential upside of 44 percent.

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Trained in fund management, Raymond is familiar with shares and various investment vehicles.

Please click here for more information about this author.

Centurion Corp  0.410 +0.005 +1.23%   
Business: Co engages in the accommodation and optical storage media manufacturing businesses. [FY18 Turnover] Workers accommodation (67.1%), students accommodation (31.4%), optical (1.5%).

Insight: Feb-19, FY18 revenue fell 12% mainly due to the le... Read More

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