Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on changes — just in case they’re material to our investing thesis. With 24 of its 30 constituents clocking gains today, the Straits Times Index (SGX: ^STI) has managed to step up by 0.76% to 3,314 points. Let’s venture outside the index for a closer look at some of the big winners of the day. Centurion Corp Ltd (SGX: OU8) has climbed by 5.61% to S$0.565. Just yesterday, the dormitory operator announced that it has won an open tender for…
Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on changes — just in case they’re material to our investing thesis.
With 24 of its 30 constituents clocking gains today, the Straits Times Index (SGX: ^STI) has managed to step up by 0.76% to 3,314 points.
Let’s venture outside the index for a closer look at some of the big winners of the day.
Centurion Corp Ltd (SGX: OU8) has climbed by 5.61% to S$0.565. Just yesterday, the dormitory operator announced that it has won an open tender for a plot of land located at Penang, Malaysia. The land, which carries a 99-year lease and covers 12.6 acres, would cost Centurion a total of RM23.2 million (around S$9 million).
Keeping in line with Centurion’s core business of owning and managing worker dormitories, the land in Penang is for a “potential development of a workers village with a capacity of approximately 12,000 beds with extensive recreation facilities and amenities designed for community living.”
Development would be carried out over two phases with Phase 1 having a capacity of 6,000 beds and slated for completion in the second half of 2016. Meanwhile, Phase 2’s covering the other 6,000 beds and is expected to be done two years after Phase 1 is ready.
Centurion would be funding the purchase with “internal resources and bank borrowings.” On that note, the company’s latest balance sheet sees it having S$63.8 million in cash while having total borrowings of S$425 million. Although the company’s balance sheet does seem a little stretched given the high amount of borrowings, the quantum of the land acquisition itself is small and probably wouldn’t strain the firm’s finances at all.
In other important news with Centurion, the company had released its third quarter earnings last Friday. For the quarter ended 30 September 2014, a 46% year-on-year spike in revenue to S$20.9 million had helped to fuel a 47% increase in net profit to S$7.92 million. The earnings release contained some interesting comments from the company about its outlook for the worker dormitories space in Singapore.
Currently, there are roughly 385,000 work permit holders in Singapore who require dormitory beds. The government has made known its aim to help provide these workers with better living conditions through purpose-built dormitories; to that effect, the Ministry of Manpower had introduced the Foreign Employee Dormitories Bill 2014 which toughened up regulations for larger dormitories (those with 1,000 or more beds). According to the company, “[t]hese new regulations bode well for [Centurion] as they act as barriers of entry for new and inexperienced dormitory operators.”
There are worries though that the supply of beds would be higher than demand as the government had recently released land for up to 100,000 beds to be built over the next two years. But, Centurion thinks that the supply-and-demand dynamics would still be favourable for the company as the land-release is “expected to replace a proportion of 70,000 beds” which belong to dormitories that are on short-term leases.
As you can see, the company seems pretty confident of a brighter future ahead. But, the risks of over-supply of beds would still be important for investors to watch, despite the optimism of Centurion’s management. Changes in the firm’s profit margins could be a gauge for how the supply-and-demand situation is playing out since tougher competition might crimp Centurion’s profits.
Spackman Entertainment Group Ltd (SGX: 40E) has spiked by 16.67% to S$0.280. The company’s shares have been very volatile of late with today’s big jump being preceded by a 9.4% fall yesterday.
Last Friday, Spackman released its third quarter earnings and saw quarterly revenue slashed by two-thirds from US$10.7 million a year ago to US$3.63 million. The big reduction in top-line weighed heavily on the bottom-line; Spackman had turned in a loss of US$5.04 million for the quarter as compared to a profit of US$4.31 million a year ago.
Spackman’s revenue had declined as the third quarter of 2013 saw the firm earn US$5.50 million as the share of profit for acting as the producer of the film Cold Eyes; the third quarter of 2014 had no such profit-sharing opportunities.
On the same day as its earnings release, Spackman also announced that it had entered into a memorandum of understanding (MOU) with Suk Young Jung, an independent third party.
Novus Mediacorp Co., Ltd. The MOU deals with Spackman’s potential acquisition of “51% or more” of Novus Mediacorp Co., Ltd.
Novus Mediacorp’s a “renowned investor, presenter, and ancillary distributor for Korean theatrical films.” Since 2009
2005, the company has invested in, presented, or acted as ancillary distributor for 54 films (35 Korean and 19 foreign ones). There’s an interesting growth angle with Novus Mediacorp’s role as an ancillary distributor.
According to Spackman, the Korean ancillary market (consisting of IPTV, digital cable, and internet VOD services) had almost tripled in size from KRW88.8 billion (around S$104 million) in 2009 to KRW267.6 billion (around S$314 million). The ancillary market has managed to benefit from Korea’s advanced internet infrastructure which has given the country “the world’s fastest download speeds.”
The acquisition is still “at a preliminary stage” and has to jump through a few hoops, including shareholder and regulatory approvals.
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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 writer Chong Ser Jing does not own shares in any companies mentioned.