UOB KH: Centurion earnings likely hit trough in 1H21

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Purpose-built worker and student dormitory operator Centurion has likely seen its earnings trough in the first half, which showed “a decent level of resilience” as vaccination rates are reaching high levels in key market segments, UOB Kay Hian said in a note Wednesday.

Last week, Centurion reported its first half net profit tumbled 58 percent on-year to S$8.74 million as headwinds from the Covid-19 pandemic pressured occupancy at accommodation assets. Revenue for the January-to-June period slipped 3 percent on-year to S$64.73 million, the company said in a filing to SGX.

UOB Kay Hian said the bottom-line was impacted by a fair value loss on investment properties, with the results in-line with expectations as first half revenue and gross profit making up 51 percent and 53 percent, respectively, of its full-year estimates.

“While the company saw lower occupancy rates in Australia, U.K.’s purpose-built student accommodation (PBSA) and Singapore’s purpose-built workers’ accommodation (PBWA), this was largely mitigated by new assets coming online from quick-build dormitories, migrant worker onboarding centers and higher management fees,” UOB Kay Hian said.

The brokerage pointed to “flowering buds of recovery in sight,” with management citing Singapore easing some pandemic-related restrictions, the U.K. lifting its remaining movement restrictions and Malaysia occupancies performing well.

“The company noted that its biggest challenge and uncertainty comes from the uneven resumption of work and university on-campus programs as there are varying levels of vaccination rates, movement control restrictions and lockdown policies across its geographic segments,” the note said.

UOB Kay Hian lowered its 2021 earnings forecast by 34 percent to take into account the fair value loss, but added its 2021 net profit estimates assume a higher bottom-line in the second half on Centurion’s guidance for 8,488 new beds this year, of which 3,840 came online in the first half.

The target price was trimmed to S$0.43 from S$0.445, with a Buy call.

Shares of Centurion were flat at S$0.335 at 12:34 p.m. SGT.