Centurion Corp Ltd’s Latest Earnings: What You Should Know

Centurion Corp Ltd (SGX: OU8), a storage disc manufacturer turned dormitory operator, had released its fiscal third-quarter earnings after last Friday’s market close.

With the completion of a reverse takeover in 2011, Centurion had started to focus on developing and running workers’ dormitories. The company currently has accommodation assets (for both workers as well as students) in a number of countries that include Singapore, Malaysia, Australia, and the United Kingdom.

With that, let’s dive into Centurion’s latest financials.

Financial and business highlights

For the reporting quarter, Centurion recorded an 18% year-on-year increase in total revenue to S$24.6 million. This was driven by a strong 21% jump in revenue to S$23.5 million from Centurion’s Accommodation Business, which in turn came about from the operations in the United Kingdom as well as higher bed capacities and rental rates across the workers accommodation portfolio.

The Optical Disc business was a drag to Centurion’s revenue growth as it continued to experience reduced market demand for physical optical disc storage media.

Despite the higher overall revenue, Centurion’s net profit came in 7% lower at S$7.36 million compared to a year ago. A 67% spike in overall finance costs from S$2.77 million to S$4.61 million had been a big driver of the lower profit seen.

On the balance sheet front, Centurion’s finances had weakened; a net debt position (total borrowings minus cash & cash equivalents) of S$361.7 million seen at end-September 2014 had grown to S$510.7 million in the reporting quarter. Centurion’s gearing ratio is at 62% as of 30 September 2015.

There was an improvement in Centurion’s cash flow situation in the reporting quarter. Operating cash flow nearly doubled from S$12.3 million a year ago to S$21.2 million while capital expenditures had shrank from S$165.3 million to just S$1.9 million.

Valuation and prospects

Kong Chee Min, Centurion’s chief exectuive, had given some insight on the company’s future growth in the earnings release:

“The workers accommodation industry in Singapore will be in transition over the next two years as the market continues to adjust to the new supply coming on-stream. Nonetheless, Centurion, with our proven operational capabilities in managing workers accommodation, is well positioned to overcome any potential headwinds.

Besides focusing our efforts on driving the performance of the Group’s existing assets, we also have a healthy pipeline of developmental projects that would generate earnings growth for the next few years.

With the stable earnings from our student accommodation portfolio, as well as our active management to grow overall portfolio occupancy and rental rates, the Group is on track to achieve continued growth in its core business in FY2015 and beyond”.

At its closing price of $0.43 last Friday, Centurion is valued at just 3 times its trailing earnings.

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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.