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RHB remains 'neutral' towards Centurion despite its Covid-19 bug

Amala Balakrishner
Amala Balakrishner4/29/2020 03:04 PM GMT+08  • 2 min read
RHB remains 'neutral' towards Centurion despite its Covid-19 bug
Collectively, the hit from the pandemic on the group’s PBSA and PBWA properties has made Lee and Cai shaving their FY20F-22F earnings by 25% (FY20), 15% (FY21), and 4% (FY22) respectively.
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SINGAPORE (Apr 29): RHB Securities is maintaining its ‘hold’ call on housing operator Centurion Corp, but at a revised target price of 41 cents. This is down 8% from its previous 49 cents call, analysts Lee Cai Ling and Jarick Seet say in an Apr 29 note.

Their move follows expectations of Centurion’s purpose-built student accommodation (PBSA) properties having lower occupancy in the coming months amid course deferment options and a move towards online leaning due to the travel restrictions from the Covid-19 pandemic.

In line with this, the group had earlier this month announced that it was permitting residents at its UK PBSA’s to terminate their leases early.

See : Centurion's Covid-19 bug intensifies as it allows UK students to terminate their leases early with an expected £5m revenue loss

As such, the analysts are looking at occupancy at Centurion’s UK facilities plummeting from 93% to 60% in FY20F, before reversing slightly to 78% in FY21F.

And while the group has yet to make available a similar pre-lease termination scheme in Australia, RHB says occupancy there is likely to inch down to 60%, from the current 78%.

Touching on the group’s purpose-built workers’ accommodation (PBWA) operations in Singapore which have been under immense scrutiny, Lee and Seet have brushed aside the possibility of an impact to its financial performance.

So far, two of Centurion’s five dormitories here – Westlite Toh Guan and Westlite Mandai have been gazetted as isolation sites.

“We do not think that there is material impact to its financial performance as rental contracts tend to be for a period of one year,” they say adding that the manpower ministry has an advisory on employers paying dormitory operators on time.

However, the duo have revised their occupancy estimates downwards to 93%, from 96%, as they “expect few businesses to go under”.

Collectively, the hit from the pandemic on the group’s PBSA and PBWA properties has made Lee and Cai shave their FY20F-22F earnings by 25% (FY20), 15% (FY21), and 4% (FY22) respectively.

As at 2.50pm, shares at Centurion Corp were down 0.5 cents or 1.30% to trade at 38 cents.

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