Dormitory operator Centurion Corp is set to lease and manage four new foreign worker dormitories that are part of the new Quick Build Dormitories (QBDs) announced by the government in June.

These facilities – which are semi-permanent structures that can be assembled relatively quickly – are set to last between two and three years, the Covid-19 multi-ministry task force had detailed in a June 1 press conference.

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Centurion’s QBD facilities will be located at Kranji Way Dormitory (1,300 beds), Tuas Crescent Dormitory (1,020 beds), Tuas South Boulevard Dormitory (628 beds) and Jalan Tukang Dormitory (3,420 beds).

Collectively Centurion will manage some 6,368 bed spaces at a monthly rate of $1.09 million for a lease term of three years, with an option to extend for an additional year.

The mainboard-listed company’s latest win follows an award of a management service contract from the Jurong Town Corporation (JTC) to manage some 4,200 beds across three sites for six months starting 3Q20F.

It also has the option to extend its management of this contract for another six months.

These latest developments have led CGS-CIMB Securities’ analysts to dub the company a “front runner” in winning QBD contracts.

“The additional 6,400 beds will expand Centurion’s purpose-built workers’ accommodation (PBWA) portfolio in Singapore by 22.9%, bringing its total capacity to 34,400,” analysts Ngoh Yi Sin and Caleb Pang estimate.

“With Kranji Way Dormitory being the first of such QBDs, we think the win reflects Centurion’s established track record in PBWA and accords it a first-mover edge. We expect more contracts in the pipeline, with four more QBDs to be built by end-2020,” they add.

Despite being the highest bidder among 10 other suppliers for the QBD tender, Centurion’s management is confident of its contract returns given its potential platform synergies and bargaining power on rental rates.

Ngoh and Pang estimate that the company will need at an occupancy rate of at least 70% and a monthly rental rate of $325, to break even.

“Assuming Centurion can ramp up the occupancy level across the four QBDs by end-FY20F to at least 80%, and charge a min. of S$300 monthly rental per bed, we estimate that it could add S$0.8m-5.1m to its FY21-22F net profit (or c.2-14% accretion),” the duo add.

Nonetheless, Ngoh and Pang are maintaining their “add” or “buy” call and target price of 40 cents. They estimate this will give Centurion a 14.3% upside from its 35 cent close on Septemeber 2. 

As at 10.40am, shares of Centurion were up a cent or 2.86% to 36 cents.