Brokers’ take: RHB expects better rental rates for Centurion; lifts target price

The research house believes Centurion is well-positioned to yield better rental rates given the shortage of dormitory supply in Singapore

RHB on Monday (Oct 14) raised its target price on Centurion by 39.5 per cent to S$1.06 from S$0.76.

This comes as the research house believes that Centurion is well-positioned to yield better rental rates amid a shortage of dormitory supply in Singapore.

The new target is based on an estimated price-to-earnings ratio of nine times for FY2025, up from 7.5 times.

It is also about half a standard deviation higher from the counter’s historical mean to account for longer term growth potential in new markets abroad, including Hong Kong and Xiamen.

“We turn more positive on Centurion on better bed rates for purpose-built workers accommodation (PBWA) in Singapore, with longer-term growth supported by overseas properties,” said RHB analyst Alfie Yeo in a report.

As a result, he raised Centurion’s FY2025 and FY2026 earnings estimates by 12 per cent and 17 per cent, respectively.

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This comes as his PBWA bed rate assumptions for FY2025-2026 were lifted by 10 to 15 per cent to S$400 to S$450 per bed per month.

Additionally, Yeo also maintained his “buy” call on the counter.

He projects Centurion’s overseas projects to boost long-term growth. To recap, Centurion in September announced its first foray into the Build-To-Rent accommodation market in China.

The dormitory operator, together with Xiamen City Home Apartment Management, will retrofit, renovate and/or manage and operate residential accommodation in Xiamen, China for working professionals.

While Yeo noted that this overseas development has “negligible impact for now” and Centurion’s immediate-term growth is largely unchanged, he expects the projects to enhance growth in core markets such as Singapore.

Shares of Centurion were trading up 0.6 per cent or S$0.005 at S$0.84 as at 9.49 am on Monday.