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Centurion Corporation is still cheap and a strong BUY.

Sunday, November 17, 2019

Regular readers know that a business which I like very much as an investment for income is Centurion Corporation.

I like accumulating stocks of businesses which have a proven track record as reliable income generators.

I especially like accumulating them when they are trading at a big discount to NAV.

If they offer an attractive dividend yield with a relatively conservative payout ratio, even better.

To understand why I invested in Centurion Corporation back in early 2017,

Added Centurion Corporation to my portfolio.

In fact, I like Centurion Corporation so much that I increased my investment in the business this year a few times.

I shared this in a blog in July 2019.

Largest investments updated (3Q 2019).

I bought more when Mr. Market wasn't paying Centurion Corporation much, if any, attention.

Persistent insider buying, however, prevented the share price from falling below 40 cents a share.

So, I would queue to buy at 40 cents a share but often would buy at 40.5 cents a share.

On 25 October 2019, Centurion Corporation's share price closed at 43 cents a share, rising on the back of very high volume.

It broke resistance provided by the 200 days moving average (200dMA).

A bullish sign.


Could we see share price moving higher from here on?


Your guess is as good as mine.

Well, more importantly, what is the implication for someone like me who likes the business?

I think it could be more difficult for me to accumulate closer to 40 cents a share in future.

Look at the chart again.

The 200dMA is gently turning up now and should approximate 41.5 cents soon.

The shorter term 20 days moving average (20dMA) has risen sharply and is currently providing immediate support at 42 cents a share.

Fortunately, I am cool with not buying more at higher prices because my investment in Centurion Corporation is pretty significant right now.

However, for anyone who still wants to get a bigger slice of the pie, paying a slightly higher price now is something probably worth considering.

Why do I say this?

Centurion Corporation got the attention of the analysts at DBS recently.

This reminds me of the time when analysts in UOB Kay Hian sank my plan to continue accumulating Hock Lian Seng's stock on the cheap.

Some readers might remember this blog from December 2014.

Hock Lian Seng: Robust order book.

I said:

"If Hock Lian Seng should attract coverage from more analysts and if they are mostly positive about the stock like I am, I think opportunities to accumulate the stock on weakness could be harder to come by in future."

A case of deja vu?


Newer readers might also be interested in this blog from February 2017.

Hock Lian Seng returns 100% and more.

Some points from a report by DBS earlier this month:

1. Centurion Corporation's purpose built workers accommodation (PBWA) segment is resilient and the expected increase of 3,600 beds in this segment may boost income by 11%.

2. Centurion Corporation's purpose built students accommodation (PBSA) bed count increased by 12.4% so far this year and this may improve top line by 11.2%.

3. Demand for PBWA in Singapore continues to outstrip supply by about 135,000 beds and despite a tightening on the number of foreign workers, occupancy rate rose from 96.9% to 97.4%.

4. Over in Malaysia, Centurion Corporation's PBWA occupancy rose from 90.2% to 91.2% as the Worker's Minimum Standard of Housing and Amenities (Amendment) Bill was passed in July.

5. PBSA occupancies improved from 90.3% to 91% in the UK.

6. PBSA occupancies in Australia improved from 80.7% to 89.8% in RMIT Village and from 82.1% to 93.9% in East End Adelaide.

DBS has issued a DCF based target price of 52 cents a share for Centurion Corporation.

I am more concerned with Centurion Corporation's ability to generate income for me consistently and meaningfully.

However, if DBS is worth their salt, there is more than 20% upside from Centurion Corporation's last Friday's closing price of 42 cents a share.

Time will tell.

I like being paid while I wait.

In the meantime, I will munch on an Old Chang Kee curry puff and watch the following video.

Related post:
More on Centurion Corporation.

Also see:
Centurion Corp posts 21% rise in 3Q earnings to $8.8 mil on higher revenue.

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