Centurion upbeat on strong student dorm demand, bed shortage in key study destinations

MAINBOARD-LISTED Centurion Corporation expects the demand for purpose-built student accommodation (PBSA) to outstrip supply in several markets, supporting the group’s push into the area.

The group noted that the segment had “supportive fundamentals” across all major ideal education destinations, including the US, the UK, Australia and Hong Kong. It has 15 assets in operation in Australia, the UK and US currently.

These markets face an inadequate supply of beds. In Australia, for example, the lack of student accommodation has led to international students competing with locals for housing. Centurion’s management cited a report by Australia’s Institute of Public Affairs, which projected that more than half of Australia’s net new housing supply will be absorbed by international students.

David Phey, Centurion’s head of corporate communications, said at a briefing on Wednesday (Aug 14): “This reflects a stronger need for a larger supply of PBSAs, and universities and private operators like ourselves need to work together to be able to address the shortage.”

His comments follow Centurion’s announcement of a 209 per cent jump in earnings to S$118.2 million, from S$38.3 million in the year-ago period. Net profit was boosted by fair-value gains of S$61.6 million in the half-year period.

Revenue for H1 rose 27 per cent to S$124.4 million, from S$97.9 million the year before. This came from strong financial occupancies in its purpose-built workers’ accommodation (PBWA) and PBSA portfolios, and positive rental rate reversions across all operating markets.

UK portfolio

The PBSA segment makes up around 24 per cent of Centurion’s top line, and 7 per cent of its beds.

Most of the PBSA beds and revenue come from the UK. The average financial occupancy of its UK assets rose 9 percentage points to 99 per cent. Revenue for the segment climbed 26 per cent to S$20.8 million.

Average financial occupancy refers to the percentage of gross leasable area for which a tenant is obliged to pay rent under the agreement, regardless of the actual use or occupation of the area’s tenant.

Centurion said the UK remains a popular destination for students seeking higher education, and although the UK has tightened its immigration laws to address student visa abuse, the universities there have committed to growing their international student numbers.

While Centurion is exploring options to enhance its UK portfolio, it does not yet have concrete plans for expanding its foothold in the country. Chief executive Kong Chee Min noted that the capitalisation rate for student accommodation, unlike commercial properties, is still compressed.

Elaborating, he said the process and cost of converting commercial properties into student accommodation was challenging: “Two years ago, we explored (such) developments… but when we looked at it financially, it was not that attractive.”

Strengthening the pipeline

The group’s current PBSA pipeline is thus focused on Australia and Hong Kong. The group is awaiting official approval to redevelop the existing car park of dwell Village Melbourne City (a student housing centre in north Melbourne) into a new PBSA block housing 600 beds.

It is also looking to seek planning approval for a land site near RMIT University in Melbourne, which would yield around 575 beds.

Over in Hong Kong, the company clinched two master leases for properties in Kowloon in the second quarter of this year; the properties, expected to be operational from September, will yield 66 and 89 beds.

With Hong Kong looking to become an international post-secondary education hub, and given its underserved demand for student accommodation, rental yields in the city could go up, said the company’s management.

Asked whether Centurion would consider entering Asian markets such as South Korea and Japan as well, Kong demurred, saying that the company would need to be able to scale its operations in those markets. It used to have an asset in Seoul, which was disposed for 21.3 billion won (S$21.5 million) in April 2023.

“By scaling, I’m referring to the asset-light strategy, and in Hong Kong, we do see that there are opportunities,” he said. “We believe that this model works in Hong Kong… so we want to go (there) in a bigger manner.”

Meanwhile, in the PBWA segment, the group is conducting asset enhancements in Malaysia, and redeveloping its properties in Singapore. Westlite Ubi, a new dormitory, is expected to be completed in December.

Kong said that not all rents have been reflected in the books, as more leases are likely to be renewed in the second half of the year.

In an analyst note after the briefing, CGS International analysts Ong Khang Chuen and William Tng flagged the continued strong rental reversions as a re-rating catalyst for Centurion’s stock.

They reiterated their “add” call on the counter and raised its target price to S$0.78 from S$0.65.

Centurion’s shares were trading flat at S$0.655 as at the midday break.