More Sterling Growth Ahead
CENT’s 4Q13 core PATMI of SGD5.6m (+26.3% y-o-y), made on the back of SGD17.6m in revenue (+1% y-o-y), was in line. Its outlook remains positive, as total beds are expected to increase 60% to 54k which leads to a 32% core earnings CAGR in FY13-16. Expect further upside from new acquisitions of student accommodations in the UK and Australia. Maintain BUY, with a DCF-based TP of SGD0.82.
Drastic shortage of supply leads to 43% growth in accommodation business. Within Singapore’s workers accommodation business, an additional 50k-60k beds are expected to be delivered by the end of this year. This will increase the total supply of dormitory beds to 200k-210k, which falls well short of the demand created by the 500k work permit holders in Singapore. The evident shortage of supply will continue to put upward pressure on rental rates and occupancy levels coupled with CENT’s rapid expansion plans, we can expect the company to see strong growth from FY13 to FY16.
Gross and net margins continue to improve. All in all, we expect CENT’s gross and net margins to continue to improve. It grew 4% and 5% to 52% and 28% respectively in FY13 due to the: i) increase in contributions from its accommodation business, and ii) a 30% decrease in contribution from the optical business. We expect optical disc’s contribution to continue declining at a 30% rate annually, and the unit to cease operations by the end of 2015 - which would improve its margins as the optical business has been a drag on their earnings and margins.
Dividend increases 50% y-o-y to SGD0.006. Due to the company’s strong performance in FY13, management has declared a dividend of SGD0.006, up 50% from FY12. However, its dividend payout will remain low as the company is on an aggressive expansion plan.
Diversifying further into student accommodation business. After the acquisition of RMIT village, we expect management to further diversify into the student accommodation business by making acquisitions focused in Australia and London. For this segment, 2014 will be an exciting year of expansion
Source: RHB Research
No comments:
Post a Comment