Hot stock: Centurion up 10% after CGS-CIMB initiates coverage with ‘add’ call

SHARES of worker and student accommodation provider Centurion Corporation rose by as much as 10 per cent on higher-than-usual volume on Monday (Jul 17), after CGS-CIMB initiated coverage on the stock with an “add” call.

Its shares hit S$0.44 – a three-year high – just before the midday trading break. The last time its share price closed near this level was on May 6, 2020.

Its trading volume of 4.9 million shares at the trading break was also well above its average trading volume of 234,898.

No married deals were recorded at the time, based on ShareInvestor data.

After the market reopened, the stock fell slightly to S$0.435 as at 2pm. It closed the day at S$0.43, up S$0.03 or 7.5 per cent.

On Friday, CGS-CIMB had initiated coverage on Centurion Corporation with a target price of S$0.58. It expects the group to see strong demand recovery, now that global borders have reopened.

Centurion is also expected to benefit from the ongoing undersupply of beds across its operating geographies, regulatory reforms for purpose-built worker accommodations (PBWA) and growing awareness for migrant worker welfare, the research house said.

“We believe the supply tightness in Singapore will persist in the medium term, given the government’s intention to progressively de-densify existing PBWA,” said CGS-CIMB analysts Ong Khang Chuen and William Tng.

New supply will enter the market progressively only in 2025, they added.

There is therefore a good chance Centurion’s quick-build dormitories (QBDs) would have their leases extended. The QBDs were part of the Singapore government’s temporary solution to meet housing requirements for migrant workers during the pandemic.

On the student accommodation front, the return of Chinese students to most international markets should boost Centurion’s occupancy rates and income.

The analysts also see the dormitory operator’s valuation as “undemanding”, given that it trades at 4.9 times’ estimated earnings for FY2024, and a 57 per cent discount to its revalued net asset value (RNAV).

Centurion’s target price is based on a blended valuation of earnings and RNAV, which they said better reflects the company’s “strong near-term earnings potential” and its possible asset recycling in Malaysia.

Following the close of trading on Monday, the company said its voluntary withdrawal from the main board of the Stock Exchange of Hong Kong will take place at 4pm on Nov 1, 2023, subject to all conditions of the proposed delisting being fulfilled.