Centurion gains on expanded worker accommodation portfolio; number of beds to fall in 2022

Singapore

MAINBOARD-LISTED Centurion Corporation saw increased revenue from its expanded worker accommodation portfolio, although increased capital expenditure from the retrofitting of its purpose-built dormitories (PBDs) may hurt profits in the coming year.

The property management company posted a net profit of S$52.7 million for the full year ended December 2021, up sharply from S$17.2 million it registered a year earlier.

During the property management company's earnings call last Friday (Feb 25), head of communications David Phey said that Centurion's ability to expand its worker accommodation portfolio in Singapore made a "large difference" in the company's performance despite continued pressure from Covid-19.

In 2021, 4 quick-build dormitories (QBDs) with around 6,400 beds managed by the company in Singapore progressively came into operation throughout the year. Two migrant worker onboarding centres also commenced operations in the first half of 2021.

The company's Malaysian worker dormitory portfolio was also expanded with a new 21 year lease with a 9-year extension option to to manage a ready-built workers' dormitory from the Selangor State Development Corporation, adding 6,044 beds.

Centurion chief executive Kong Chee Min said that while rentals at the QBDs are higher because workers are provided with more space, rentals across the company's Singapore worker accommodation portfolio are expected to remain stable.

This is because the supply of accommodation in the market has increased while the number of foreign workers remains depressed.

According to figures from the Ministry of Manpower, there were 17.8 per cent fewer work pass holders in June 2021 than there were in December 2019.

However, the company also noted that the total number of purpose-built workers' accommodation will decline from 73,656 to 58,309 in 2022 because of retrofitting works in Malaysia to abide by the country's Workers' Minimum Standards of Housing and Amenities Act 2019.

The Act sets minimum space requirements sanitary facilities ratios which reduce the number of beds available per dormitory. Still, Phey noted that the drop in bed numbers will not impact revenue generated.

"Our rental leases are (priced) per apartment unit so even though the apartment unit has fewer beds inside, the employer has to pay the same rate as before," he said.

According to Kong, there is room for rates to increase, especially if Malaysia enforces the Act's minimum standards strongly and pushes companies to seek out compliant accommodation for their workers.

Additionally, the company may also see further capital expenditure to retrofit its existing PBDs in Singapore when new specifications are announced this year.

The company declined to provide any capex guidance regarding retrofitting works as it awaits the government's announcement on the new specifications.

As for Centurion's purpose-built student accommodation (PBSA), Kong believes that there is still scope for increased rents in the United Kingdom for the next academic year as inflation rates rise as well. In the second half of 2021, average financial occupancy improved to 82 per cent. The company expects demand to strengthen as travel restrictions are lifted and more international students arrive.

The company also saw fair-value gains from its UK PBSA assets, which reflects the current market recovery, it said.

This contributed to a reduction in fair-value loss for the year to S$3.1 million, down from S$27.6 million in FY2020

A final dividend of 0.5 Singapore cent was also declared, while no dividend was announced a year earlier.

In response to questions about when the company's dividends would return to pre-pandemic levels, Kong said that the company remains cautious as a number of its properties' occupancy remain below pre-pandemic levels.

Furthermore, additional income from QBDs and other temporary measures will not persist past the next 3 years when their leases are up.

"We are careful of whether these challenges that we are seeing, whether they will drag on or not... we hope that we are able to recover to pre-Covid (occupancy) levels as soon as possible," he added.

Centurion closed down 1.5 per cent or $0.005 at $0.34 on Friday (Mar 4).