Centurion Corporation

[BlueDogMeow]

At 49.5c today, Centurion is at best fairly valued (and this is quite a stretch already).

[TUBInvesting]

Wrote a short piece of analysis on this stock.

In summary, these are my views:

Pros:
- TTJ Holdings Ltd and Hock Lian Seng Holdings Ltd are unable to renew their lease for their dormitory business
- Economic Moat
- Number of Foreign Worker in Singapore
- High Net Profit Margin
- 90% occupancy rate for Singapore Dormitories
- Warrants with Exercise Price at 50 cents
- Paid off $100 Million of Notes

Cons:
- Highly Leverage
- No REIT Listing
- Tuas South Ave 9 Dormitory Expiring Soon
- Significant Additional Investment Properties
- Unclear in Occupancy Rate in Overseas Business

My conclusion is not to purchase the stock at this price now.

http://tubinvesting.blogspot.sg/2016/10/...iness.html

Not Vested.

[bardsmanship]

Price war in workers’ dormitories
http://www.theedgeproperty.com.sg/conten...ormitories

Market rate per worker in Tuas has fallen from $300-$350/month 2 years ago to $200-$250/month now, due to a combination of reduced demand (layoffs in O&G, manufacturing and construction) and increased supply (opening of 2 new workers' dorms). 

They spent more than $60 million to build the dorm, and pay a monthly rent of $1.16 million/month to JTC for the duration of the lease (in this case, 3+3 years). Monthly operating cost/worker is $50, but this does not include the cost of wear and tear, which is "very high".

After taking into consideration the land rent, amortization of the property, interest repayment on the loan they took out to finance the construction of the dorm, and operating cost, their monthly break-even point is close to $3.2 million. Their resident population is 14,000, so assuming a monthly rent of $250/worker, rental revenue is $3.5 million/month. Note that this monthly rent is on the high side of the $200-$250 range mentioned earlier. Also, it does NOT include additional purchases of PPE that is required due to wear and tear. The net profit margin seems pretty thin. 

The dorm owned by the operator in the article, Tuas View, is one of the biggest in Singapore (16,800 beds) and appears to have pretty good facilities judging from the photos posted on their website, so if they're struggling I wonder how Centurion's Westlite dorms are doing. 

Centurion's Westlite Tuas dorm is its only dorm that has a short lease tenure (expiring next year), though it is their biggest so if the lease isn't renewed there's going to be a big hit to revenue. On the bright side, it appears the government will not be releasing any more sites for new purpose-built workers’ dormitories in the near future, which will hopefully limit further competition on price.

[TTTI]

Price war in workers’ dormitories
http://www.theedgeproperty.com.sg/conten...ormitories

Market rate per worker in Tuas has fallen from $300-$350/month 2 years ago to $200-$250/month now, due to a combination of reduced demand (layoffs in O&G, manufacturing and construction) and increased supply (opening of 2 new workers' dorms). 

They spent more than $60 million to build the dorm, and pay a monthly rent of $1.16 million/month to JTC for the duration of the lease (in this case, 3+3 years). Monthly operating cost/worker is $50, but this does not include the cost of wear and tear, which is "very high".

After taking into consideration the land rent, amortization of the property, interest repayment on the loan they took out to finance the construction of the dorm, and operating cost, their monthly break-even point is close to $3.2 million. Their resident population is 14,000, so assuming a monthly rent of $250/worker, rental revenue is $3.5 million/month. Note that this monthly rent is on the high side of the $200-$250 range mentioned earlier. Also, it does NOT include additional purchases of PPE that is required due to wear and tear. The net profit margin seems pretty thin. 

The dorm owned by the operator in the article, Tuas View, is one of the biggest in Singapore (16,800 beds) and appears to have pretty good facilities judging from the photos posted on their website, so if they're struggling I wonder how Centurion's Westlite dorms are doing. 

Centurion's Westlite Tuas dorm is its only dorm that has a short lease tenure (expiring next year), though it is their biggest so if the lease isn't renewed there's going to be a big hit to revenue. On the bright side, it appears the government will not be releasing any more sites for new purpose-built workers’ dormitories in the near future, which will hopefully limit further competition on price.

Tuas View may operate on razor thin margins, but that's not true for Centurion.

Aside from the newer Papan dorm, the other dorms are operating at close to full occupancy, and on a group basis, their margins are still crazily high.
IMO, it is unlikely their westlite tuas will be renewed next year

[bardsmanship]

Tuas View may operate on razor thin margins, but that's not true for Centurion.

Aside from the newer Papan dorm, the other dorms are operating at close to full occupancy, and on a group basis, their margins are still crazily high.
IMO, it is unlikely their westlite tuas will be renewed next year

Yes, I've looked at Centurion's numbers and am aware that their profit margins have always been good. But I wonder how they're managing to do so well when their peers are struggling - do they have some kind of competitive advantage, or is it that Tuas View is badly run?

I'm also curious about the $1.16 million rent that ASE supposedly pays the JTC each month for the Tuas View land. That amounts to $83.5 million over the entire 6 years' lease, which looks extremely high. Centurion only paid $80.8 million for the land on which its Westlite Woodlands dorm was built, about a year after ASE won the site for Tuas View. And that was for a lease term of 30 years!

[TTTI]

Tuas View may operate on razor thin margins, but that's not true for Centurion.

Aside from the newer Papan dorm, the other dorms are operating at close to full occupancy, and on a group basis, their margins are still crazily high.
IMO, it is unlikely their westlite tuas will be renewed next year

Yes, I've looked at Centurion's numbers and am aware that their profit margins have always been good. But I wonder how they're managing to do so well when their peers are struggling - do they have some kind of competitive advantage, or is it that Tuas View is badly run?

I'm also curious about the $1.16 million rent that AES supposedly pays the JTC each month for the Tuas View land. That amounts to $83.5 million over the entire 6 years' lease, which looks extremely high. Centurion only paid $80.8 million for the land on which its Westlite Woodlands dorm was built, about a year after AES won the site for Tuas View. And that was for a lease term of 30 years!

It is hard to get a true competitive moat in this business, as the main consideration for businesses will always be the price.
Having said that, Centurion is the best of it's class in the dorm management business.
Their competitive edge lies in the small little details:
for eg. Westlite papan tie down with extrenal vendor for on-site training and upgrading courses for the dorm tenants,
their dorms with workers working in Jurong island also get to check in on-site within the dorm instead of having to queue up to enter jurong island etc
Stuff like that
The other details are the intangibles such as their relationship with clients. This is a big factor because most companies wouldn't mind paying just a bit more if the relationship is established, rather than risk working with a new dorm provider.
Centurion's rates are priced at the sweet spot just above the average.

I have looked at centurion for a long time and am convinced the management is best of it's class, but unfortunately the whole industry is a tough place to be in currently, and that looks set to continue for sometime to come.

[bardsmanship]

Thanks TTTI for sharing!

After taking into consideration the land rent, amortization of the property, interest repayment on the loan they took out to finance the construction of the dorm, and operating cost, their monthly break-even point is close to $3.2 million. Their resident population is 14,000, so assuming a monthly rent of $250/worker, rental revenue is $3.5 million/month. Note that this monthly rent is on the high side of the $200-$250 range mentioned earlier. Also, it does NOT include additional purchases of PPE that is required due to wear and tear. The net profit margin seems pretty thin. 

Quoting myself to add that I believe the breakeven figure for Tuas View in the article is suspect. They've included not only the amortized cost of constructing the property in the calculation, but also the repayment of the loan taken out to finance this construction, which is double-counting. ASE may not be as profitable as Centurion, but it's probably not doing as badly as implied in the article.

[TUBInvesting]

Tuas View may operate on razor thin margins, but that's not true for Centurion.

Aside from the newer Papan dorm, the other dorms are operating at close to full occupancy, and on a group basis, their margins are still crazily high.
IMO, it is unlikely their westlite tuas will be renewed next year

Yes, I've looked at Centurion's numbers and am aware that their profit margins have always been good. But I wonder how they're managing to do so well when their peers are struggling - do they have some kind of competitive advantage, or is it that Tuas View is badly run?

I'm also curious about the $1.16 million rent that AES supposedly pays the JTC each month for the Tuas View land. That amounts to $83.5 million over the entire 6 years' lease, which looks extremely high. Centurion only paid $80.8 million for the land on which its Westlite Woodlands dorm was built, about a year after AES won the site for Tuas View. And that was for a lease term of 30 years!

It is hard to get a true competitive moat in this business, as the main consideration for businesses will always be the price.
Having said that, Centurion is the best of it's class in the dorm management business.
Their competitive edge lies in the small little details:
for eg. Westlite papan tie down with extrenal vendor for on-site training and upgrading courses for the dorm tenants,
their dorms with workers working in Jurong island also get to check in on-site within the dorm instead of having to queue up to enter jurong island etc
Stuff like that
The other details are the intangibles such as their relationship with clients. This is a big factor because most companies wouldn't mind paying just a bit more if the relationship is established, rather than risk working with a new dorm provider.
Centurion's rates are priced at the sweet spot just above the average.

I have looked at centurion for a long time and am convinced the management is best of it's class, but unfortunately the whole industry is a tough place to be in currently, and that looks set to continue for sometime to come.

I guess both of us have been looking at it the longest time. Very tempted after the latest fall in price but not yet vested.

Nevertheless, I was told by others to be careful of the management of Centurion, saying they were past remisiers. I don't know why their past role actually make them "worse off", but the person who told me seems to know something I don't.

Anyway I just felt the price is too high right now. Not "value" enough for me to be vested yet.

http://tubinvesting.blogspot.sg/

[bardsmanship]

Brisbane faces potential oversupply amid Aussie student housing boom

As Australia continues to rapidly expand its purpose built student accommodation (PBSA) offering with new supply of commercially-operated student beds, signs of potential oversupply are beginning to surface, particularly in Brisbane.

Some 10,000 students beds proposed in Brisbane – which already has “the largest pipeline of beds in the country” – are set to add to the city’s existing supply of over 9,325 beds, says a report published by commercial realtors JLL in November.

The company notes this is due to “strong support from local government and the availability of land”, as many residential sites have been converted from residential development applications (DA) to student accommodation DA.

JLL estimates the collective penetration rate across the Brisbane university student accommodation market to be at 9.7%.

Recent openings in Brisbane have included the repurposing of 363 Adelaide Street and Iglu Student Accommodation’s new tower on Mary Street. Together, these two developments have added over 1,000 beds to Brisbane’s existing supply.

Iglu runs two student accommodation facilities in Brisbane, Iglu Brisbane City and Iglu Kelvin Grove. The student accommodation group is majority-owned by Singapore sovereign wealth fund GIC and the investment arm of Macquarie Group, Macquarie Capital.

In an article published by The Australian on Thursday, Iglu director Richard Smith claims it is “always a challenge” to fill the properties, as most of the new supply is targeting a similar student demographic.

“In our view, Brisbane is the most oversupplied market in Australia… The student market is about half the size of Sydney and Melbourne yet has the largest development pipeline in Australia,” Smith is said to have told the paper.

In recent years, a couple of Singapore companies have ventured into the student dorm sector across the US, UK and Australia.
There is Mainboard-listed Centurion Corp which made its maiden acquisition of RMIT Village with 456 beds in Melbourne back in 2014.

Just last month, Mapletree Investments, a unit of Singapore state investment company Temasek Holdings, bought a US portfolio of seven dorms with nearly 6,000 beds in total.

Earlier in March, Mapletree had also scooped up a portfolio of 25 student properties across 12 UK university towns with that same number of beds for £417 million ($710 million).

[TTTI]

Brisbane faces potential oversupply amid Aussie student housing boom

As Australia continues to rapidly expand its purpose built student accommodation (PBSA) offering with new supply of commercially-operated student beds, signs of potential oversupply are beginning to surface, particularly in Brisbane.

Some 10,000 students beds proposed in Brisbane – which already has “the largest pipeline of beds in the country” – are set to add to the city’s existing supply of over 9,325 beds, says a report published by commercial realtors JLL in November.

The company notes this is due to “strong support from local government and the availability of land”, as many residential sites have been converted from residential development applications (DA) to student accommodation DA.

JLL estimates the collective penetration rate across the Brisbane university student accommodation market to be at 9.7%.

Recent openings in Brisbane have included the repurposing of 363 Adelaide Street and Iglu Student Accommodation’s new tower on Mary Street. Together, these two developments have added over 1,000 beds to Brisbane’s existing supply.

Iglu runs two student accommodation facilities in Brisbane, Iglu Brisbane City and Iglu Kelvin Grove. The student accommodation group is majority-owned by Singapore sovereign wealth fund GIC and the investment arm of Macquarie Group, Macquarie Capital.

In an article published by The Australian on Thursday, Iglu director Richard Smith claims it is “always a challenge” to fill the properties, as most of the new supply is targeting a similar student demographic.

“In our view, Brisbane is the most oversupplied market in Australia… The student market is about half the size of Sydney and Melbourne yet has the largest development pipeline in Australia,” Smith is said to have told the paper.

In recent years, a couple of Singapore companies have ventured into the student dorm sector across the US, UK and Australia.
There is Mainboard-listed Centurion Corp which made its maiden acquisition of RMIT Village with 456 beds in Melbourne back in 2014.

Just last month, Mapletree Investments, a unit of Singapore state investment company Temasek Holdings, bought a US portfolio of seven dorms with nearly 6,000 beds in total.

Earlier in March, Mapletree had also scooped up a portfolio of 25 student properties across 12 UK university towns with that same number of beds for £417 million ($710 million).

This article is a bit misleading...
Centurion's Aussie assets are only in Melbourne and UK
They're not affected by an oversupply in Brisbane and I don't think they'll be moving into Brisbane
Also, their Melbourne student dorms are mature assets, not greenfield projects
Which is why occupancy is well above 90%
Ditto for their UK assets
Brisbane is not known as a student destination because of the lack of quality universities. Thus far, Centurion's assets are mostly in the proximity of popular universities.