Centurion Corporation’s New Big Shareholder – What Does It Mean For Its Investors?

The storage disc manufacturer and dormitory operator Centurion Corporation Limited (SGX: OU8) has been making the headlines recently. Last December, the company had been busy acquiring land in Jakarta, Indonesia and student accommodation assets in Australia.

Today, Centurion revealed that construction and civil engineering outfit Lian Beng (SGX: L03) has become one of its substantial shareholders

Details of the deal

On 6 March 2014, Lian Beng acquired 38 million shares of Centurion Corporation in an off-market married deal from the latter’s controlling shareholders: Centurion Properties Pte Ltd and Mr David Loh Kim Kang. With this acquisition, Lian Beng now holds a 5.026% stake in Centurion Corporation.

In addition, other private investors also bought another 42 million shares from the pair of Centurion Properties and Loh. All told, the two controlling shareholders of Centurion Corporation had sold 70 million and 10 million shares respectively in this transaction; the 80 million shares that exchanged hands was equivalent to 10.58% of the total share capital of Centurion Corporation.

The entire transaction has now reduced Centurion Properties and Loh’s collective stake in Centurion Corporation from 65.98% to 55.40%.

Mr Tony Bin, who holds the title of “Executive Director – Accommodation Business” in Centurion Corporation, commented on the deal on behalf of Centurion Properties: “Since Centurion undertook an RTO of SM Summit in August 2011, the Group has rapidly expanded its accommodation portfolio across Singapore, Malaysia, Australia and Indonesia. In just two-and-a-half years, the Group’s accommodation business grew from just one asset with 5,300 beds to its present bed capacity of over 34,000 beds, and there are plans to grow to over 50,000 beds by the end of 2015.”

He continued:  “Investors are starting to see the investment merits of the company and there is now significant interest in the shares from investors including strategic partners. By reducing our stake, we hope to increase the public float and market liquidity of the shares. We are still controlling shareholders and remain very confident in the Group’s growth prospects”.

Foolish Insights

A strategic investment by Lian Beng marks new confidence that Centurion Corporation is heading in the right direction with its focus on dormitories. That’s important as the company’s optical disc business is facing dwindling sales based on itslatest financial results.

Going forward, the company expects to grow its bed-capacity to more than 50,000 by 2015 when its new dormitories ( one in Singapore, one in Australia, and two in Malaysia) are up and running. Just as a manufacturing company can bump up its profits with increased sales,  an increase in bed capacity could help boost Centurion Corporation’s profits in the future too, assuming costs can be kept under control.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.