Research from SooChow CSSD Capital Markets (Asia), SCCM Asia Research

SCCM Asia Research

Research from SooChow CSSD Capital Markets (Asia)

Headquartered in Singapore, SooChow CSSD Capital Markets (Asia) is an investment bank focusing on emerging growth companies across Asia, providing a full suite of investment banking services, including corporate finance, mergers and acquisitions advisory, equity capital markets, institutional equities sales and trading and equities research.

SooChow CSSD Capital Markets (Asia)

Thematic (Sector/Industry)

<ul><li><a href="https://www.smartkarma.com/entities/frasers-logistics-commercial-trust" target="_blank" data-smartkarma-citation="entities:22748" rel="noopener">Frasers Logistics &amp; Commercial Trust (FLT SP)</a> acquires suburban commercial property in AUS for A$60.3m</li><li><a href="https://www.smartkarma.com/entities/centurion-corp-ltd" target="_blank" data-smartkarma-citation="entities:5186" rel="noopener">Centurion Corp (CENT SP)</a> acquires freehold student accommodation in Nottingham, UK for GBP10.4m</li><li>Highly leveraged homeowners face headwinds from rising rates, large incoming supply</li></ul>

Frasers Logistics &amp; Commercial Trust (FLT SP) acquires suburban commercial property in AUS for A$60.3mCenturion Corp (CENT SP) acquires freehold student accommodation in Nottingham, UK for GBP10.4mHighly leveraged homeowners face headwinds from rising rates, large incoming supply

ASEAN Builder's Scoop (20May22) - FLT Buys AUS Commercial Prop for ~A$60m

<ul><li><a href="https://www.smartkarma.com/entities/propnex-ltd" target="_blank" data-smartkarma-citation="entities:27209" rel="noopener">Propnex Ltd (PROP SP)</a> 1Q22 NPAT fell 8% YoY; Expects prices to grow 3-5% in 2022</li><li>Condo resale prices edge up +0.7% MoM as suburban prices hit new record high</li><li><a href="https://www.smartkarma.com/entities/centurion-corp-ltd" target="_blank" data-smartkarma-citation="entities:5186" rel="noopener">Centurion Corp (CENT SP)</a> 1Q22 revenue rose ~47% YoY on enlarged capacity and new business streams</li></ul>

Propnex Ltd (PROP SP) 1Q22 NPAT fell 8% YoY; Expects prices to grow 3-5% in 2022Condo resale prices edge up +0.7% MoM as suburban prices hit new record highCenturion Corp (CENT SP) 1Q22 revenue rose ~47% YoY on enlarged capacity and new business streams

ASEAN Builder's Scoop (11May22) - PROP Home Prices to Rise 3-5% in 2022

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

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<p>ASCOTT Residence Trust Ascott Trust: HMN -0.51% (ART) announced last week that it will acquire a student accommodation property in Texas, in the United States, which will be its third student accommodation asset investment this year.</p>

<p>While ART may be the first Singapore-listed trust to venture into student housing as S-Reits continue to diversify across property sub-segments, there are other Singapore-listed companies such as Singapore Press Holdings SPH: T39 +1.03% , Far East Orchard Far East Orchard: O10 -3.64% , Centurion Corporation Centurion: OU8 0% , Wee Hur Wee Hur: E3B 0% , and Metro Holdings Metro: M01 0% that invest, own, and manage purpose built student accommodation assets (PBSA).</p>

<p>According to Knight Frank, global investments in PBSA reached a record US$16.3 billion in 2018.</p>

<p>Savills considers the PBSA sector to be counter-cyclical and notes in a report that it was one of the few asset classes that showed resilience during the global financial crisis in 2008.</p>

<p>In addition, data collated by Jones Lang Lasalle (JLL) has shown that over a third of deals for student housing in 2021 so far have been by private equity firms, as investors continue to seek exposure to alternative real estate sectors.</p>

<p>ART's most recent acquisition is a freehold 1,005-bed student accommodation asset in Lubbock, Texas, for S$93.8 million. Wildwood Lubbock is a cottage-style property that is fully leased for the 2021 academic year and serves over 40,000 students from Texas Tech University.</p>

<p>The trust expects the acquisition to increase its pro forma FY2020 distribution per stapled security by approximately 1.5 per cent.</p>

<p>It also notes the longer average leases of student housing at one year, versus hotel stays.</p>

<p>ART has acquired four longer-stay accommodation assets this year, after expanding its strategy and diversifying its portfolio from traditional hospitality assets, further increasing its resilience and stable income.</p>

<p>Its two other student housing assets are in Atlanta (acquired in February 2021 for S$126.3 million) and South Carolina (acquired in June 2021 for S$73.4 million), both in the US.</p>

<p>In June 2021, ART also acquired three rental housing properties in Sapporo, Japan for S$85.2 million.</p>

<p>Following the acquisitions, ART's rental housing and student accommodation properties will comprise about 11 per cent of its portfolio value, up from 5 per cent in end 2020. It has a medium-term target to expand it to 15 to 20 per cent.</p>

<p>CDL Hospitality Trust CDL HTrust: J85 -0.85% (CDLHT) in July this year has announced that it is revising its principal investment strategy to include rental housing, student accommodation and senior housing assets.</p>

<p>The trust sees the revision of its strategy as a way to bring more diversification to its portfolio, enhance income stability as tenants typically have longer lengths of stay compared to hotels, and expand its range of investment opportunities given its broader mandate.</p>

<p>Singapore Press Holdings (SPH) has a portfolio of 28 PBSA assets in the UK with a total of 7,723 beds under its brands Capitol Students, Student Castle, and Galileo Residenz.</p>

<p>Far East Orchard owns a PBSA portfolio in the UK comprising over 3,500 beds in the cities of Brighton, Bristol, Leeds, Liverpool, Newcastle-upon-Tyne and Sheffield.</p>

<p>Centurion Corporation has a PBSA segment with 19 assets in Australia, South Korea, the UK and US that accounted for 25 per cent of its revenue in H12021.</p>

<p>Wee Hur Holdings' PBSA business is undertaken via two of its funds which manage two operational assets, one asset pending operations and the rest at various stages of development.</p>

<p>Metro Holdings' PBSA portfolio consists of two properties in Warwick and Bristol, in the UK, and a 7.3 per cent investment in the Mapletree Global Student Accommodation Private Trust. </p>

<p><strong><em>REIT Watch is a weekly column on The Business Times, <a href="https://www.businesstimes.com.sg/companies-markets/ascott-joins-trend-of-hospitality-reits-pivoting-to-student-housing">read</a><a href="https://www.businesstimes.com.sg/companies-markets/10-s-reits-yielding-long-term-annualised-returns"> </a>the original version.</em></strong></p>
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ASCOTT Residence Trust Ascott Trust: HMN -0.51% (ART) announced last week that it will acquire a student accommodation property in Texas, in the United States, which will be its third student accommodation asset investment this year.

While ART may be the first Singapore-listed trust to venture into student housing as S-Reits continue to diversify across property sub-segments, there are other Singapore-listed companies such as Singapore Press Holdings SPH: T39 +1.03% , Far East Orchard Far East Orchard: O10 -3.64% , Centurion Corporation Centurion: OU8 0% , Wee Hur Wee Hur: E3B 0% , and Metro Holdings Metro: M01 0% that invest, own, and manage purpose built student accommodation assets (PBSA).

According to Knight Frank, global investments in PBSA reached a record US$16.3 billion in 2018.

Savills considers the PBSA sector to be counter-cyclical and notes in a report that it was one of the few asset classes that showed resilience during the global financial crisis in 2008.

In addition, data collated by Jones Lang Lasalle (JLL) has shown that over a third of deals for student housing in 2021 so far have been by private equity firms, as investors continue to seek exposure to alternative real estate sectors.

ART's most recent acquisition is a freehold 1,005-bed student accommodation asset in Lubbock, Texas, for S$93.8 million. Wildwood Lubbock is a cottage-style property that is fully leased for the 2021 academic year and serves over 40,000 students from Texas Tech University.

The trust expects the acquisition to increase its pro forma FY2020 distribution per stapled security by approximately 1.5 per cent.

It also notes the longer average leases of student housing at one year, versus hotel stays.

ART has acquired four longer-stay accommodation assets this year, after expanding its strategy and diversifying its portfolio from traditional hospitality assets, further increasing its resilience and stable income.

Its two other student housing assets are in Atlanta (acquired in February 2021 for S$126.3 million) and South Carolina (acquired in June 2021 for S$73.4 million), both in the US.

In June 2021, ART also acquired three rental housing properties in Sapporo, Japan for S$85.2 million.

Following the acquisitions, ART's rental housing and student accommodation properties will comprise about 11 per cent of its portfolio value, up from 5 per cent in end 2020. It has a medium-term target to expand it to 15 to 20 per cent.

CDL Hospitality Trust CDL HTrust: J85 -0.85% (CDLHT) in July this year has announced that it is revising its principal investment strategy to include rental housing, student accommodation and senior housing assets.

The trust sees the revision of its strategy as a way to bring more diversification to its portfolio, enhance income stability as tenants typically have longer lengths of stay compared to hotels, and expand its range of investment opportunities given its broader mandate.

Singapore Press Holdings (SPH) has a portfolio of 28 PBSA assets in the UK with a total of 7,723 beds under its brands Capitol Students, Student Castle, and Galileo Residenz.

Far East Orchard owns a PBSA portfolio in the UK comprising over 3,500 beds in the cities of Brighton, Bristol, Leeds, Liverpool, Newcastle-upon-Tyne and Sheffield.

Centurion Corporation has a PBSA segment with 19 assets in Australia, South Korea, the UK and US that accounted for 25 per cent of its revenue in H12021.

Wee Hur Holdings' PBSA business is undertaken via two of its funds which manage two operational assets, one asset pending operations and the rest at various stages of development.

Metro Holdings' PBSA portfolio consists of two properties in Warwick and Bristol, in the UK, and a 7.3 per cent investment in the Mapletree Global Student Accommodation Private Trust. 

REIT Watch is a weekly column on The Business Times, read the original version.



REIT Watch - Ascott joins trend of hospitality Reits pivoting to student housing

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<div><em><strong>Non- SGX Report: These equity research reports are not written by the SGX</strong>.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></div>
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<p>Singapore Company Update</p>
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<h2>Centurion Corporation</h2>
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<h3>Regulatory clarity needed</h3>
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<p><strong>Investment Thesis:</strong></p>
<p><strong>Current low valuation justified given regulatory headwinds and absence of dividends in FY20.</strong> No interim dividend expected in 1H21 as business operations are not expected to improve. The stock is trading at 7.1x FY21F PE, close to - 1SD of its 4-year mean. Relatively high net-debt-to-equity of 1x is also a concern, especially if interest rates spike up.</p>
<p><strong>Revenue and earnings downside risk from pilot PBWA regulations.</strong> New regulations for workers dormitories could reduce capacity at workers dormitories by half in the worst case. Still, these regulations are currently at a pilot stage and may yet still be adjusted. Share price is likely to remain capped until more clarity emerges on this front.</p>
<p><strong>Key catalyst</strong> – Relaxation of restrictions in UK and Australia. PBSAs could receive boost on earlier than expected reopening of borders to international students, which could increase Centurion’s share price.</p>
<p><strong>Valuation</strong>:<br>Maintain HOLD with slightly lower DCF-based TP of S$0.38based on a WACC of 6.0% and terminal growth rate of 1.0%. Our TP implies 7.9x FY21F PE, which is close to -1SD of Centurion’s 4-year average forward PE of 7.7x.</p>
<p><strong>Where we differ:</strong><br>We have factored in the impact on Centurion’s PBSA occupancies based on movement restrictions for foreigners extending into 2Q21.</p>
<p><strong>Key Risks to Our View:</strong><br>Unfavourable changes in regulatory environment; foreign exchange volatility; sustained deterioration in economic outlook for Singapore and Malaysia affecting foreign worker demand; worsening or extended COVID-19 outbreak.</p>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.

Singapore Company Update



Centurion Corporation



Regulatory clarity needed




Investment Thesis:
Current low valuation justified given regulatory headwinds and absence of dividends in FY20. No interim dividend expected in 1H21 as business operations are not expected to improve. The stock is trading at 7.1x FY21F PE, close to - 1SD of its 4-year mean. Relatively high net-debt-to-equity of 1x is also a concern, especially if interest rates spike up.
Revenue and earnings downside risk from pilot PBWA regulations. New regulations for workers dormitories could reduce capacity at workers dormitories by half in the worst case. Still, these regulations are currently at a pilot stage and may yet still be adjusted. Share price is likely to remain capped until more clarity emerges on this front.
Key catalyst – Relaxation of restrictions in UK and Australia. PBSAs could receive boost on earlier than expected reopening of borders to international students, which could increase Centurion’s share price.
Valuation: Maintain HOLD with slightly lower DCF-based TP of S$0.38based on a WACC of 6.0% and terminal growth rate of 1.0%. Our TP implies 7.9x FY21F PE, which is close to -1SD of Centurion’s 4-year average forward PE of 7.7x.
Where we differ: We have factored in the impact on Centurion’s PBSA occupancies based on movement restrictions for foreigners extending into 2Q21.
Key Risks to Our View: Unfavourable changes in regulatory environment; foreign exchange volatility; sustained deterioration in economic outlook for Singapore and Malaysia affecting foreign worker demand; worsening or extended COVID-19 outbreak.













(Non-SGX Report) Centurion Corporation: Regulatory Clarity Needed

<p><em><strong>Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;</strong>SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</em></p>
<p>INITIATE COVERAGE</p>
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<h2>Centurion Corporation (CENT SP)</h2>
<h3>Strong Performance Amid COVID-19 Impact</h3>
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<p><strong>As one of the largest workers’ dormitory operators in Singapore, Centurion offers good earnings visibility with its resilient business model and favourable long-term supply- demand dynamics following the COVID-19 trough. Its shares currently trade at a trough of 0.47x 2020F P/B– providing for an opportune time to buy into the stock, given the increased likelihood of a vaccine discovery. Initiate coverage on Centurion with a BUY and target price of S$0.44 - implying 30.7% upside.</strong></p>
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<p><strong>Resilient business model for workers’ accommodations</strong>. Centurion Corporation (Centurion) is one of the largest providers of purpose-built workers accommodations (PBWA) in Singapore and Malaysia. Its business model provides good earnings visibility, with contracts typically being 12 months long and with rent payments collected in advance. With 1-2 months’ of rental deposits collected in advance, the risk of non- collection is low. Two-thirds of its revenue is derived from the higher-margin PBWA segment with the remaining one-third coming from purpose-built student accommodations (PBSA). For student accommodations, the countries where Centurion has a presence in have experienced chronic undersupply of available beds relative to growing student populations.</p>
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<p><strong>Stable revenues from PBWA despite COVID-19</strong>. Centurion’s PBWA segment has a proven track record, with occupancy not falling below 84% since 2011. As Singapore also remains heavily reliant on migrant workers in many sectors (eg construction and O&amp;G), we believe that the company will be relatively less affected by the current COVID-19- induced recession vs other sectors.</p>
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<p><strong>PBSA segment expected to remain defensive.</strong> While demand for PBSAs has been affected due to COVID-19 travel restrictions affecting international students, we expect an increase in UK and Australian domestic demand in the medium term to bridge this demand gap. According to multiple higher-education industry sources, student enrolment numbers are expected to remain high - given that seeking higher education is deemed as a viable choice against the backdrop of dim employment prospects.</p>
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<p><strong>New opportunities available for Centurion.</strong> Given that the government has been piloting new specifications for migrant workers in PBWA and is planning to develop 60,000 new beds within an accelerated timeline, Centurion’s market leading position provides opportunities for them to further expand their PBWA portfolio.</p>
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<p>I<strong>nitiate coverage with a BUY.</strong> Our target price of S$0.44 is based on DCF (WACC 5.5%, terminal growth: 1.0%), implying a 11.1x 2020F P/E and 0.63x 2020F P/B as we have factored in bed capacity growth and a gradual recovery in occupancies.</p>
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Non- SGX Report: These equity research reports are not written by the SGX.&nbsp;SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.
INITIATE COVERAGE

Centurion Corporation (CENT SP)
Strong Performance Amid COVID-19 Impact




As one of the largest workers’ dormitory operators in Singapore, Centurion offers good earnings visibility with its resilient business model and favourable long-term supply- demand dynamics following the COVID-19 trough. Its shares currently trade at a trough of 0.47x 2020F P/B– providing for an opportune time to buy into the stock, given the increased likelihood of a vaccine discovery. Initiate coverage on Centurion with a BUY and target price of S$0.44 - implying 30.7% upside.






Resilient business model for workers’ accommodations. Centurion Corporation (Centurion) is one of the largest providers of purpose-built workers accommodations (PBWA) in Singapore and Malaysia. Its business model provides good earnings visibility, with contracts typically being 12 months long and with rent payments collected in advance. With 1-2 months’ of rental deposits collected in advance, the risk of non- collection is low. Two-thirds of its revenue is derived from the higher-margin PBWA segment with the remaining one-third coming from purpose-built student accommodations (PBSA). For student accommodations, the countries where Centurion has a presence in have experienced chronic undersupply of available beds relative to growing student populations.


Stable revenues from PBWA despite COVID-19. Centurion’s PBWA segment has a proven track record, with occupancy not falling below 84% since 2011. As Singapore also remains heavily reliant on migrant workers in many sectors (eg construction and O&amp;G), we believe that the company will be relatively less affected by the current COVID-19- induced recession vs other sectors.


PBSA segment expected to remain defensive. While demand for PBSAs has been affected due to COVID-19 travel restrictions affecting international students, we expect an increase in UK and Australian domestic demand in the medium term to bridge this demand gap. According to multiple higher-education industry sources, student enrolment numbers are expected to remain high - given that seeking higher education is deemed as a viable choice against the backdrop of dim employment prospects.


New opportunities available for Centurion. Given that the government has been piloting new specifications for migrant workers in PBWA and is planning to develop 60,000 new beds within an accelerated timeline, Centurion’s market leading position provides opportunities for them to further expand their PBWA portfolio.


Initiate coverage with a BUY. Our target price of S$0.44 is based on DCF (WACC 5.5%, terminal growth: 1.0%), implying a 11.1x 2020F P/E and 0.63x 2020F P/B as we have factored in bed capacity growth and a gradual recovery in occupancies.











Non-SGX Report: Centurion Corporation: Strong Performance Amid COVID-19 Impact

Singapore

Centurion Corporation Limited owns, develops and manages quality, purpose-built workers accommodation assets in Singapore and Malaysia, and purpose-built student accommodation assets in Singapore, Australia, the United Kingdom (“UK”), the United States (“US”) and South Korea.

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Centurion Corp (CENT SP)

ASEAN Builder's Scoop (20May22) - FLT Buys AUS Commercial Prop for ~A$60m

CENT buys Nottingham PBSA for ~GBP10m; Resi oversupply + rising rates = perfect storm; BLOOM to develop IR in Cavite; BKK housing demand rebounded...

SCCM Asia Research

ASEAN Builder's Scoop (11May22) - PROP Home Prices to Rise 3-5% in 2022

Suburban resale condo prices hit new record in Apr22; SMPH boosted by rebounding mall biz; Office demand outside NCR improving

SCCM Asia Research

REIT Watch - Ascott joins trend of hospitality Reits pivoting to student housing

ASCOTT Residence Trust Ascott Trust: HMN -0.51% (ART) announced last week that it will acquire a student accommodation property...

Singapore Exchange Ltd (SGX)

(Non-SGX Report) Centurion Corporation: Regulatory Clarity Needed

Non- SGX Report: These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external...

Singapore Exchange Ltd (SGX)

Non-SGX Report: Centurion Corporation: Strong Performance Amid COVID-19 Impact

Non- SGX Report: These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external...

Singapore Exchange Ltd (SGX)

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