SINGAPORE (Feb 4): Dormitory operator Centurion Corp might have launched Penang’s first purpose-built workers accommodation (PBWA), but analysts say this will be unlikely to fill the void left by the group’s Westlite Tuas dormitory, which ceased operations in Dec 2017.

Located in Bukit Minyak on the mainland of Penang, the Westlite Bukit Minyak PBWA held its Certificate of Completion and Compliance ceremony on Jan 29.

Centurion’s seventh PBWA in Malaysia, Westlite Bukit Minyak is situated near factories of many electrical & electronics (E&E) manufacturers.

“We believe that Centurion is in the sweet spot to tap onto the growth prospect of Penang,” says RHB Research lead analyst Lee Cai Ling in a report on Monday.  “This region has attracted many big multinational corporations (MNCs) such as Honda, Ibiden Co Ltd and Western Digital. We understand that about 30% of the land reserved for the industrial sector is still not developed.”

According to Lee, the 17,900 sqm freehold development costs some 72.3 million ringgit ($23.8 million), and has a 6,600 bed capacity.

“We think that Westlite Bukit Minyak rental rates could be at the higher end of the range or a slight premium given its first mover advantage,” she says.

However, this is unlikely to cover the hole left by the closure of Westlite Tuas Singapore.

“On a full-year basis, Westlite Bukit Minyak would likely generate about $3-4 million in revenue based on 95% occupancy rate, which is a fraction of the revenue lost from Westlite Tuas Singapore,” Lee says. “As such, we remain neutral as more works remain to be seen from both the PBWA and its student accommodation.”

RHB is keeping its “neutral” rating on Centurion Corp, but lowering its target price to 41 cents, from 47 cents previously.

As at 11.18am on Monday, shares in Centurion Corp are trading flat at 40.5 cents, near its 52-week low. According to RHB valuations, this implies an estimated price-to-earnings ratio of 8.8 times and a dividend yield of 6.2% for FY19.