Centurion Corporation

[weijian]

EXPIRY OF LEASE OF WORKERS’ DORMITORIES AT 90 TUAS SOUTH AVENUE 9 - TUAS LODGE 1

The Board of Directors (“Board”) of Centurion Corporation Limited (“Company”, and together with its subsidiaries, the “Group”) wishes to refer shareholders of the Company (“Shareholders”) to its announcements dated 14 March 2017 and 2 May 2017, which stated, inter alia, that the tenure for a dormitory currently owned by the Group at 90 Tuas South Avenue 9 – Tuas Lodge 1 (“Westlite Tuas”) with a bed capacity of 8,600 beds will expire on 30 January 2018, after the 9-month extension of lease offered by the Ministry of National Development (“MND”).

The Board wishes to update Shareholders that the Company had submitted an application to MND for a further extension of the lease of Westlite Tuas. MND has not granted a further extension of the lease as the site where Westlite Tuas situated is needed for redevelopment. The Company is in the process of making arrangements to move these workers to the other workers dormitories owned by the Group as well as to a pre-arranged dormitory nearby with available bed capacity. Concurrently, we are working with the Building and Construction Authority on the reinstatement and return of the land by 30 January 2018. The Group has benefited from the 9 months extension by the authorities even the lease has expired on 30 April 2017. With no further extension, the Group will no longer have the benefit of generating additional revenue from Westlite Tuas.

[weijian]

Secondary listing on HKEX is successful.

Centurion prices Hong Kong IPO shares at HK$3.18; deal 4.1 times subscribed

SINGAPORE - Dormitory developer Centurion Corp has priced its secondary-listing offer in Hong Kong at HK$3.18 per share, near the mid-point of price talk between HK$3 and HK$3.30.

The 36-million-share offering was 4.1 times subscribed, based on applications for 112.5 million public offer shares and 35.2 million placement shares, the Singapore mainboard-listed company said on Monday (Dec 11) before the market opened.

In response to demand for the public offer shares, Centurion has increased its public tranche to 10.8 million shares from six million shares, while reducing its placement tranche to 25.2 million shares from 30 million shares.

http://www.straitstimes.com/business/com...k-of-hk318

[Debronic]

Secondary listing on HKEX is successful.

Centurion prices Hong Kong IPO shares at HK$3.18; deal 4.1 times subscribed

SINGAPORE - Dormitory developer Centurion Corp has priced its secondary-listing offer in Hong Kong at HK$3.18 per share, near the mid-point of price talk between HK$3 and HK$3.30.

The 36-million-share offering was 4.1 times subscribed, based on applications for 112.5 million public offer shares and 35.2 million placement shares, the Singapore mainboard-listed company said on Monday (Dec 11) before the market opened.

In response to demand for the public offer shares, Centurion has increased its public tranche to 10.8 million shares from six million shares, while reducing its placement tranche to 25.2 million shares from 30 million shares.

http://www.straitstimes.com/business/com...k-of-hk318

Just to clarify, this is a dual primary listing, not a secondary HK listing. The difference between the two is that to qualify for a dual primary listing, Centurion would have to satisfy all regulatory requirements for both SGX and HKSE whilst in a secondary listing, a company just needs to follow largely the listing rules of the primary listing board (SGX) and gets extensive waivers on listing rules for the secondary one. 

You can refer to HKSE's link here for more details on the difference: http://www.hkex.com.hk/Listing/Rules-and...sc_lang=en

Centurion's initial announcement which states the type of HK listing it applied for can be found here: http://infopub.sgx.com/FileOpen/Centurio...eID=448137

In any case, I think the subscription rate is on the low side considering the limited amount of money they are raising and how hot the IPO market is in HK. The lack of interest is also reflected in the anaemic HK price, which is currently below listing price. Unsurprising perhaps, given how very Singapore/Malaysia centric their business still is. Maybe they will get more recognition in HK once they scale up their global student accommodation business. But for now, the impact of the HK listing seems pretty muted apart from the balance sheet boost they get from the listing proceeds.

[weijian]

Hi Debronic,
Thanks for correcting me. It is interesting that they have taken the "harder route" of doing a dual primary listing, rather than a secondary listing - in which the former requires more compliance (and more money) - but both still allows one to raise fresh capital to pay off some of their new student accommodation assets.

I would guess that the Centurion Mgt is working hard at going international.

[weijian]

i thought it would be interesting to share how Centurion calculates its gearing ratio or net gearing ratio.

Most companies who are highly geared generally like to represent themselves via "net gearing ratio", ie. "total debt minus cash/equity". This paints a better picture than what the more conservative folks like to use (the simple "total debt/equity").

On page4 of Centurion's FY17 results, they have indicated that their gearing and net gearing ratio at 58% and 51% respectively. While the numerator is similar to what is been described above, but Centurion put in some footnotes to indicate that they have used "capital" as their denominator to calculate gearing, and capital is represented by "equity+debt". This is a variant of WACC ("weighted average cost of capital") and investors generally use this as the denominator to calculate ROC. But i haven't seen much of this methodology been used else where! A gearing of 50% with this calculation definitely looks pretty non alarming on paper!

http://infopub.sgx.com/FileOpen/CCL-4Q-F...eID=490568

[sykn]

The primary listing in HKSE didn't do much to the share price, it appears.

If they use capital for the denominator, then it is not D/E ratio anymore; it's debt to capital ratio, which is a different metric.

[specuvestor]

^^ I’m wondering if this is considered misleading

Secondary listing on HKEX is successful.

Centurion prices Hong Kong IPO shares at HK$3.18; deal 4.1 times subscribed

SINGAPORE - Dormitory developer Centurion Corp has priced its secondary-listing offer in Hong Kong at HK$3.18 per share, near the mid-point of price talk between HK$3 and HK$3.30.

The 36-million-share offering was 4.1 times subscribed, based on applications for 112.5 million public offer shares and 35.2 million placement shares, the Singapore mainboard-listed company said on Monday (Dec 11) before the market opened.

In response to demand for the public offer shares, Centurion has increased its public tranche to 10.8 million shares from six million shares, while reducing its placement tranche to 25.2 million shares from 30 million shares.

http://www.straitstimes.com/business/com...k-of-hk318

Just to clarify, this is a dual primary listing, not a secondary HK listing. The difference between the two is that to qualify for a dual primary listing, Centurion would have to satisfy all regulatory requirements for both SGX and HKSE whilst in a secondary listing, a company just needs to follow largely the listing rules of the primary listing board (SGX) and gets extensive waivers on listing rules for the secondary one. 

You can refer to HKSE's link here for more details on the difference: http://www.hkex.com.hk/Listing/Rules-and...sc_lang=en

Centurion's initial announcement which states the type of HK listing it applied for can be found here: http://infopub.sgx.com/FileOpen/Centurio...eID=448137

In any case, I think the subscription rate is on the low side considering the limited amount of money they are raising and how hot the IPO market is in HK. The lack of interest is also reflected in the anaemic HK price, which is currently below listing price. Unsurprising perhaps, given how very Singapore/Malaysia centric their business still is. Maybe they will get more recognition in HK once they scale up their global student accommodation business. But for now, the impact of the HK listing seems pretty muted apart from the balance sheet boost they get from the listing proceeds.

Hi Debronic,
Thanks for correcting me. It is interesting that they have taken the "harder route" of doing a dual primary listing, rather than a secondary listing - in which the former requires more compliance (and more money) - but both still allows one to raise fresh capital to pay off some of their new student accommodation assets.

I would guess that the Centurion Mgt is working hard at going international.

Interesting info on dual primary listing. What’s the incentive for companies to do dual primary listing?

[Debronic]

i thought it would be interesting to share how Centurion calculates its gearing ratio or net gearing ratio.

Most companies who are highly geared generally like to represent themselves via "net gearing ratio", ie. "total debt minus cash/equity". This paints a better picture than what the more conservative folks like to use (the simple "total debt/equity").

On page4 of Centurion's FY17 results, they have indicated that their gearing and net gearing ratio at 58% and 51% respectively. While the numerator is similar to what is been described above, but Centurion put in some footnotes to indicate that they have used "capital" as their denominator to calculate gearing, and capital is represented by "equity+debt". This is a variant of WACC ("weighted average cost of capital") and investors generally use this as the denominator to calculate ROC. But i haven't seen much of this methodology been used else where! A gearing of 50% with this calculation definitely looks pretty non alarming on paper!

http://infopub.sgx.com/FileOpen/CCL-4Q-F...eID=490568

The primary listing in HKSE didn't do much to the share price, it appears.

If they use capital for the denominator, then it is not D/E ratio anymore; it's debt to capital ratio, which is a different metric.

From what I can see, what they are using is actually a (more conservative) variant of an acceptable form of gearing calculation (https://www.investopedia.com/terms/g/gearingratio.asp), ie debt/total assets or debt ratio. The total capital definition is equivalent to total assets less non-borrowing liabilities, which would make this denominator smaller than just total assets and produce a larger number than just debt/total assets. While their variant may not be widely used, usage of debt/total assets is not uncommon. It is in fact how S-reit's gearing is calculated under MAS guidelines. 

Of course, they could have simply used the more commonly understood debt/equity but at least they didn't come out with something too fanciful like EBITDARM. 

[donmihaihai]

There is nothing to suggest the company is conservative with this level of debts. For a high leverage company, gearing ratio(many ways to calculate. Who is to say it is wrong?) by itself is useless. Interest coverage and type and maturity of debts are more important.

Their interest coverage says be very careful.

Just to add on. A 50% in this way of calculation mean the company funds their operations with more debts than equity.

[Debronic]

There is nothing to suggest the company is conservative with this level of debts. For a high leverage company, gearing ratio(many ways to calculate. Who is to say it is wrong?) by itself is useless. Interest coverage and type and maturity of debts are more important.

Their interest coverage says be very careful.

Just to add on. A 50% in this way of calculation mean the company funds their operations with more debts than equity.

Not sure if you are referring to my comments but just to clarify I wasn't saying the company is conservative in calculating gearing that way. I am just pointing out that they are using a more conservative measure of gearing than what s-reits commonly use. It's all relative. And if you look at their business model, they are probably closer to a reit than your normal property developer in that the focus is more on rental/leasing income and cashflows than on developing and selling properties. In fact, they even tried to spin off their accommodation business into a reit listing a while back but was stopped by SGX because it was deemed chain listing. (maybe this could be the reason for their choice of gearing calculation?)

I agree with you that gearing is not the only measure one should look at and that other measures like interest coverage should be considered as well. I would also add that, for Centurion, you may need to go a step further and consider future cash flows from their properties still under development (another 6600 and 440 workers' and students' beds to be added in 2018) as some of the debt is actually tied to these properties. Of course, adjustments should likewise be made to account for those that have ceased operations ie Tuas. Only then, would you get a fairer picture of their real interest coverage and other related measures. 

Anyway, I am not vested in Centurion and don't gain from defending it. Just sharing based on what I have seen having looked at it several times in the past.