CENTURION

Thumbs up sykn. Centurion put out an announcement today to correct the previous erroneous announcement.
Fact is Lee Kerk Chong BOUGHT! I also want ....

Price still going down; have to wait till it is more or less at bottom before I pick up some more!

Might be a good time to pick up some more before the release of next result. It might shoot up again after the release.

Agreed, but results will only come out next month, right? To buy near the bottom, one has to let the price drop until it's had enough and possibly rebound a little, before we know it's near the bottom. This is not easy in the current situation because the price drop is largely a function of macro factors which may not go away for quite some time.

Centurion (CENT SP) SGD0.57 BUY (TP: SGD0.83)

Exploring a REIT Listing

Centurion has announced that it is currently exploring the feasibility of establishing a REIT. Maintain BUY with an SGD0.83 TP (45.6% upside). We think that it is mainly the Singapore dormitories that will be injected and regard this as a short-term positive for Centurion, as it could greatly lower its gearing and unlock its value for these Singapore dormitories. We also expect the management to reward shareholders with a special dividend if the listing goes through.

Lowering its gearing in one blow. With interest rates expected to rise, Centurion could lower its gearing substantially if it injects its Singapore dormitories into the proposed REIT, which would be positive for the company. Centurion’s gearing stood at about 120% as of Dec 2014.

Unlocking value. Most of its Singapore dormitories are tendered at much lower prices as well as lower construction costs in the past. Over the years, they have booked a sizeable amount of revaluation gains, which will likely allow Centurion to fully unlock the value of its Singapore dormitories, depending on the price it injects the dormitories at.

Recycling capital. The Centurion management team has built up a good track record investing in accommodation assets over the past few years. The cash from the sale of its assets can be used for further potential strategic acquisitions.

Providing an additional option for investors. By establishing a REIT, Centurion aims to provide an additional option to investors who are seeking stable dividend gains, while at the same time allowing those who are more focused on growth to continue to be invested in Centurion.

Potential special dividend. We believe that the management team will reward its shareholders by means of a special dividend if the REIT listing is successful.

Maintain BUY with a SGD0.83 TP. We believe that this REIT listing will be positive for Centurion in terms of unlocking its asset value and solving its high gearing. Maintain BUY with an SGD0.83 TP.