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Singapore Property Analyst

Anni Kum

Thematic (Sector/Industry)

Malaysia & singapore / Thematic (Sector/Industry)

Singapore Real Deals is a fortnightly property digest that takes you through the peculiarities of Singapore's real estate market. In this issue, we examine Singapore’s Purpose Built Workers Accommodation (PBWA) industry landscape in light of the nation’s foreign work force policy.
The number of Work Permit holders in the construction, marine, processing and manufacturing industries has declined in the last three years and we see the government being content to keep the foreign workers quota unchanged for these sectors in Budget 2019. In spite of the continued decline in the foreign workers population amidst a soft patch in those industries, <a href="https://www.smartkarma.com/entities/5186" target="_blank" data-smartkarma-citation="entities:5186:1">Centurion Corp (CENT SP)</a>, a major PBWA operator in Singapore, has identified a huge gap between demand and supply, where demand outstrips supply by 120,000 to 150,000 beds. This shortfall of supply represents a whopping 54% to 67% of existing bed capacity for PBWA. There is no new supply expected in 2019 and we observed that government policies continue to encourage the shift of foreign workers from public housing, on-site dormitories and other non-purpose built accommodation to PBWA.
However, capacity growth for PBWA is limited by land scarcity, high construction cost as well as stricter regulatory standards which increase the operators’ running costs.
Based on Centurion’s results for the financial year ended 2018 (FY2018), its portfolio of four workers accommodation in Singapore is enjoying a healthy average occupancy rate of 96%. Pre-tax profit margin improved from 60% in FY2017 to 62% in FY2018. In light of the heavy regulation in Singapore’s PBWA, the company is expecting stronger growth to come instead from its PBWA business in our neighbouring country, Malaysia. There are about 1.7 million registered legal foreign workers in Malaysia. Half of this number is from manufacturing. The Malaysian government is said to be drafting new laws requiring employers to provide adequate housing for foreign workers. Centurion’s PBWA capacity in Malaysia is forecast to grow 28% in 2019 and a further 20% in 2020 to reach 36,400 beds, while its capacity in Singapore is forecast to remain constant at 26,100 over the next two years. That said, the strong profit margin of its PBWA business in Singapore could still be sustainable due to the demand and supply imbalance and high entry barriers.
Centurion, the only listed operator (dual listing in Singapore and Hong Kong <a href="https://www.smartkarma.com/entities/26587" target="_blank" data-smartkarma-citation="entities:26587:1">Centurion Corp (6090 HK)</a> ), is believed to be one of the largest operators in Singapore's S$720-million1 dollar PBWA industry based on its 10.8% share of industry revenue and 11.7% share of total bed capacity. Investing in Centurion is a cheaper option to profit from running a PBWA compared to being an operator. Besides its core business in PBWA, Centurion operates a growing portfolio of student accommodation in the United States, United Kingdom, Australia, Singapore and South Korea.

Singapore Real Deals is a fortnightly property digest that takes you through the peculiarities of Singapore's real estate market. In this issue, we examine Singapore’s Purpose Built Workers Accommodation (PBWA) industry landscape in light of the nation’s foreign work force policy.
The number of Work Permit holders in the construction, marine, processing and manufacturing industries has declined in the last three years and we see the government being content to keep the foreign workers quota unchanged for these sectors in Budget 2019. In spite of the continued decline in the foreign workers population amidst a soft patch in those industries, Centurion Corp (CENT SP), a major PBWA operator in Singapore, has identified a huge gap between demand and supply, where demand outstrips supply by 120,000 to 150,000 beds. This shortfall of supply represents a whopping 54% to 67% of existing bed capacity for PBWA. There is no new supply expected in 2019 and we observed that government policies continue to encourage the shift of foreign workers from public housing, on-site dormitories and other non-purpose built accommodation to PBWA.
However, capacity growth for PBWA is limited by land scarcity, high construction cost as well as stricter regulatory standards which increase the operators’ running costs.
Based on Centurion’s results for the financial year ended 2018 (FY2018), its portfolio of four workers accommodation in Singapore is enjoying a healthy average occupancy rate of 96%. Pre-tax profit margin improved from 60% in FY2017 to 62% in FY2018. In light of the heavy regulation in Singapore’s PBWA, the company is expecting stronger growth to come instead from its PBWA business in our neighbouring country, Malaysia. There are about 1.7 million registered legal foreign workers in Malaysia. Half of this number is from manufacturing. The Malaysian government is said to be drafting new laws requiring employers to provide adequate housing for foreign workers. Centurion’s PBWA capacity in Malaysia is forecast to grow 28% in 2019 and a further 20% in 2020 to reach 36,400 beds, while its capacity in Singapore is forecast to remain constant at 26,100 over the next two years. That said, the strong profit margin of its PBWA business in Singapore could still be sustainable due to the demand and supply imbalance and high entry barriers.
Centurion, the only listed operator (dual listing in Singapore and Hong Kong Centurion Corp (6090 HK) ), is believed to be one of the largest operators in Singapore's S$720-million1 dollar PBWA industry based on its 10.8% share of industry revenue and 11.7% share of total bed capacity. Investing in Centurion is a cheaper option to profit from running a PBWA compared to being an operator. Besides its core business in PBWA, Centurion operates a growing portfolio of student accommodation in the United States, United Kingdom, Australia, Singapore and South Korea. 

Singapore Real Deals (Issue 4): Purpose Built Workers Accommodation, an Alternative Asset Class