- Centurion Corporation is set to increase its bed capacity in Johor by 9% by 4Q 2025 via its ongoing asset enhancement initiatives.
- The company’s recent sale and leaseback agreements align with its asset-light strategy to accelerate its asset under management growth in Malaysia.
- The demand for quality worker accommodations in Malaysia remains strong, driven by regulatory standards and market needs.
Centurion Corporation Ltd (SGX:OU8) (CNCL.SI) is a clear beneficiary from the Johor-Singapore Special Economic Zone (JS-SEZ) due to its operations in Malaysia, particularly in Johor. The JS-SEZ is a strategic initiative aimed at transforming the border region between Malaysia’s Johor state and Singapore into a premier economic hub.
Centurion Corporation owns, develops, and manages purpose-built workers accommodation (PBWA) assets in Singapore and Malaysia, and purpose-built student accommodation (PBSA) assets in Australia, the United Kingdom, and the United States. It owns and manages a portfolio of 34 operational accommodation assets totaling 66,660 beds, as of September 30, 2024.
In Malaysia, Centurion Corporation operates eight worker dormitories, offering a total bed capacity of 27,373 as of end-3Q 2024, with 66% of these located in Johor. The JS-SEZ is expected to provide tax breaks and streamlined regulatory processes for firms, making Johor a more attractive investment destination.
Potential Growth
- Increasing Bed Capacity: Centurion Corporation is implementing asset enhancement initiatives (AEI) to increase bed capacity in Johor by approximately 9% by 4Q 2025. The company is also exploring opportunities to develop around 7,000 additional beds in Nusajaya, Iskandar Johor.
- Robust Demand: Despite the government’s freeze on foreign worker quota applications, the worker accommodation sector in Malaysia remains underserved. The demand for quality PBWA is likely to remain strong in Malaysia, supported by the enforcement of Act 446 in Malaysia, which sets standards for worker housing in line with international guidelines.
Company Strategic Moves
- Sale and Leaseback Agreements: In December 2023, Centurion Corporation entered into sale and leaseback agreements for two of its Malaysian assets with KWAP, a public sector pension fund. This strategic move aligns with the company’s asset-light strategy to accelerate its asset under management growth in Malaysia, capitalizing on the favorable regulatory environment.
- Optimizing Asset Performance: Centurion Corporation is focusing on “unlocking value” from its assets by capitalizing on the high demand for worker and student accommodations. This involves optimizing asset performance and exploring potential sales or leaseback opportunities to generate additional revenue.
Overall 3Q 2024 Financial Performance
- Revenue Growth: Centurion Corporation recorded a 22% year-on-year (YoY) growth in revenue to S$62.1 million in 3Q 2024. In the first nine months of 2024 (9M 2024), Malaysia contributed S$14.3 million in revenue, accounting for 8% of Centurion Corporation’s total revenue of S$186.5 million.
- Positive Rental Reversions: The company’s PBWA segment saw a 23% YoY revenue growth in 3Q 2024, driven by continued strong rental revisions in Singapore amid tight supply of dorm beds. Its PBSA segment grew by 15% YoY in 3Q 2024, driven by improved occupancy to 98%.
Malaysia 3Q 2024 Performance
- Occupancy Rates: Average financial occupancy declined to 90% in 9M 2024 compared to 94% in 9M 2023, excluding beds unavailable due to ongoing AEI at Westlite Senai II and including beds added in 4Q 2023 with AEI completed at Westlite Senai.
- Revenue Stability: Revenue remained steady at S$14.3 million in 9M 2024, compared to S$14.7 million in 9M 2023. A weaker Malaysian Ringgit translated to lower revenue when reported in Singapore dollars, but in local currency, the Malaysia PBWA portfolio recorded a 1% growth in revenue, mainly due to positive rental revisions.
Risks
- Execution Challenges in JS-SEZ: Firms with operations in Johor indicate that execution is key, with most saying it is too soon to decide on expansion plans arising from the deal.
- Regulatory Changes: Changes in regulations could affect the demand for worker and student accommodations.
Centurion Corporation’s strategic expansion plans in Johor present a compelling investment opportunity, based on the company’s focus on increasing bed capacity and revenue growth. Additionally, the demand for quality worker accommodations remains high, supported by regulatory standards and market needs.
Investors can monitor Centurion Corporation’s expansion progress, track its coming 4Q 2024 financial performance, and stay informed about regulatory changes and market conditions.
Disclaimer: ProsperUs Manager of Content, Hailey Chung, does not own shares of the company.
