For Investors: A Quick Overview of The Cost Structure of Centurion Corp Ltd

Centurion Corp Ltd (SGX: OU8) is one of Singapore’s largest workers and student accommodation owner-operators. Investors in Singapore’s stock market may have noticed the company for the simple fact that it has been a big long-term winner – over the past five years, the company’s stock is up by 93%.

The company’s strong gains prompted me to dig in further to better understand it. In a previous article, I looked at the different ways Centurion earns its keep. I thought it would be interesting and useful to follow up with a look at the company’s cost structure.

Here’s a table showing the company’s various expenses in 2015 and 2014:

Centurion cost table
Source: Centurion 2015 annual report

There are a few quick takeaways from the table above.

Firstly, employee compensation is the largest expense for Centurion, representing close to 25% of the company’s total expenses in 2015.

Secondly, the majority of Centurion’s costs are fixed in nature. The costs with a high proportion of a fixed-component include the aforementioned employee compensation, rental expenses, depreciation and amortisation, property tax, repairs and maintenance, system costs, insurance, advertising, legal and professional fees, and “others”.

I do not have an exact breakdown of how much of each these costs are fixed in nature, but I can estimate that around 80% to 90% of Centurion’s total costs in 2015 are fixed. Given this high proportion of fixed costs, it is imperative that Centurion achieve a high occupancy rate in its dormitory and accommodation assets in order to maximise their profitability.

By understanding Centurion’s cost structure, investors can gain a clearer perspective on the company’s future profitability.

If you like what you've seen, you can get even more investing insights and analyses from The Motley Fool's weekly investing newsletter Take Stock Singapore. It's FREE, so do check it out here.

Also, like us on Facebook to follow our latest news and articles. The Motley Fool's purpose is to help the world invest, better.

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