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,
See:
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.
See:
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.
Question:
Could we see share price moving higher from here on?
Answer:
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.
See:
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?
Maybe.
Newer readers might also be interested in this blog from February 2017.
See:
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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36 comments:
Hi AK,
It sure seems like 50/200MA cross over is happening, but in Apr 19, that happened too, with no significant appreciation in share price. It will probably take more than one positive analyst report for good things to happen.
Although patience is a virtue, looking at SPH's and Far East Orchard's recent acquisition of student accommodation, I do hope for more acquisition of specialty accommodation assets from OU8 while the iron is still hot!
Glad to see your posts pop up now and then, having a break from your Neverwinter adventuring? :)
Hi AK, thank you for the update on Centurion. Been holding this stock for many years and collecting the yearly dividend. As you have mentioned, Mr Market does not seem to like Centurion and it really take a lot of patience to hold on this stock. On a side note, understand that you are also holding on to Accordia Golf Trust, may you also post an update on your view on their latest result. Hope you are free to conduct another evening with AK event.
Cheers and take care.
Tcc
Hi keng,
To be sure, technical analysis is more accurate when there is higher volume.
Centurion Corporation's chart is lacking volume most of the time.
The management will do their work and I will do my adventuring in Neverwinter. ;p
I will be pretty busy in Neverwinter for a few weeks in a row from this Friday on.
Blog more while I still can. ;)
Hi AK,
Thank you for posting an update on Centurion. It really take a lot of patience to hold on this stock which is ignored by Mr Market. But glad that it does pay out a yearly dividend while we wait for her to be appreciated. On a side note, would like to find out from you what is your take on the latest quarterly result of Accordia Golf Trust.
Hope that you are "FREE" to conduct another Evening with AK session.
Take care and all the best in your adventure game.
Hi TCC,
I don't have anything new to say about Accordia Golf Trust.
I still think it could surprise with much higher DPU in future.
Could take a few years to materialize.
Well, at least I hope so. ;p
See:
3Q 2018 passive income: AGT.
You are not the first to ask about "Evening with AK and friends".
I know many want this.
However, I am still on a break from public appearances.
When I am ready to make an appearance, I promise you will read about it here. :)
See:
Give me F.I.R.E.
AK is lazy.
So, readers must cultivate patience. ;p
Hi Ak,
aiya! i also want to accumulate more Centurion but was busy beefing up warchest... hope got more chance again soon...
oh... Old Chang Kee hor jiak? =P
Hi Daniel,
Investing in Centurion Corporation is probably more rewarding than investing in most S-REITs in the longer run.
I love Old Chang Kee curry puffs, especially when they are "free".
A blog about Old Chang Kee from January 2013:
Have my curry puff and eat it too.
Hehehe. ;p
hello AK
While you are talking about Centurion.. May i ask you to talk a bit about Hock Lian Seng and Sembcorp Industries which i bought some while eavesdropping on you but i bought in at a higher price of 0.47 /5.03 .. will i see the light in the tunnel? thanks and cheers ..
so happy you took a break and chat here again,:)
Hi Ruby,
With regards to Hock Lian Seng, I hyperlinked a blog from February 2017 in the blog above:
Hock Lian Seng returns 100%...
I reduced exposure by 50% at what I thought was a fairly good exit price.
My current holdings are free of cost.
I am quite happy to hold on to my remaining investment in Hock Lian Seng as I am getting free money yearly.
Hock Lian Seng is financially strong and well managed.
Hock Lian Seng is not another Chip Eng Seng. ;p
As for SembCorp Industries, you might or might not remember this blog:
Sembcorp Industries: Partial divestment.
I sold at $4.82 and $4.83 a share.
My remaining investment in SembCorp Industries is pretty small.
Although nursing a paper loss, I am willing to wait out the cyclical downturn.
See what happened with KepCorp?
It came out of the blue.
Could it happen to SembCorp too?
Maybe. :)
It could be very dangerous to eavesdrop on AK talking to himself especially if you only hear certain parts. :p
Hi AK,
Enjoys reading your posts and have benefited in acquiring some Wilmar after your blog on it. Thanks very much. I'm starting to follow Centurion now. Really appreciate your way of putting things so simply for most to read and understand.
I've recent retired (I'm in my late 50s) too although not by choice and have started to take investing much more seriously than before as I'm going to be dependent on the returns from my investments to fund my retirement years (don't wish to live on savings). My issue is that over the years, I've blindly accumulated some supposedly "blue chip" stocks which paid decent dividends (Starhub, SPH and Keppel) at rather high prices (>$4.10,$4.13 & $9.45 - very ouch!!!).
On the part of freeing some ammo for my warchest to take advantage of the opportunities presented by Mr Market currently, I will need to take some very painful decisions to cut losses from these 3 counters. May I get some kind suggestions and comments from you as well as any other experienced investors out there.
Thanks
Eaglewing
Hi Eaglewing,
Unfortunately, I am not a financial adviser and cannot help you the way you wish.
I am only talking to myself here in ASSI. ;)
I don't know how helpful these blogs are going to be for you but you might want to read:
1. Retirement adequacy for late bloomers.
2. Investing in Starhub at the right price?
Remember to always do your due diligence.
Don't just follow anyone. ;)
Oops.
Link #2 is broken.
Trying again.
2. Investing in Starhub at the right price.
Also missed one earlier.
3. Sizing my investment in SPH.
Centurion Corp to acquire student accommodation asset in Nottingham for $27 mil
https://sg.finance.yahoo.com/news/centurion-corp-acquire-student-accommodation-014622129.html
Hi Invest Sg,
Thanks for sharing this.
Taking baby steps but thinking big. :)
Hi AK
You could have commented on whether Brexit's gonna affect Centurion, if not, would you please talk to yourself and let us be enlightened? Thanks.
Hi Ok,
You think too highly of me.
I do not know enough to comment on what Brexit's effect is going to be on Centurion's investments in the UK.
All I can say is that Centurion's investments in the UK is a small portion of its business and any negative impact from Brexit is not going to be earth shattering.
Hi AK,
Still waiting for more acquisitions to happen. Sometimes slow and steady can also miss the boat.
Thakral is acquiring retirement villages in Australia while other companies are all jumping into the student accommodation bandwagon.
Hope for more transactions to happen for OU8 and I am more than willing to subscribe to any equity fund raising should there be attractive assets available.
Also, hoping for any spin-offs to happen :)
Hi keng,
Unfortunately, Centurion is constrained by their lack of excess capital.
I rather it be slow and steady than for them to stretch their balance sheet further.
The pie is big enough for a relatively small player like Centurion to find big pieces of crumbs.
A rights issue might or might not happen down the road.
However, given that the management tried to take the REIT route before, I am sure a spin off of some sort is probably just a matter of time.
I am quite happy to be paid relatively well while waiting. :)
Hi AK,
Agree with your view.
I have a question about insider purchase.
On one hand, it definitely is good that there were several insider buying of the company. But if we look at this from a income investor point of view, shouldn't it be worrying that the company is going to eventually privatize thus leading to loss of steady income stream?
Should we rejoice or despair at company privatization? :P
Hi keng,
No point worrying about something like that.
If it happens, it happens.
Won't be the first time and probably won't be the last either.
Stay calm and play Neverwinter. ;p
Hi AK ,
What are your views on the COVID-19 cases in dormitories and its impact on Centurion. This has hit Westlite Toh Guan and would prove a hit to income generation in future .
I am concerned about income generation capabilities in future, but this is across all sectors. And we can only hope that quality and proper management helps it ride out the storm .
Based on Howard Mark's memo and even LHL's address, a U shaped recovery or L shaped recovery wouldnt be surprising. In the case of a U shaped recovery , an investor would do well to hold on to his affected shares.
What I am concerned about is an L shaped recovery , where an investor should instead hold cash which is considered like an option to buy stocks at lower prices, or even reallocate within the same asset class as there are companies which are unfairly beaten down.
What are your strategies in this case ?
Hi Verseun,
In a reply to another reader, I said:
"A dormitory is almost like a microcosm of Singapore in that it is about living in a densely populated environment.
"There is no doubt that it is an environment that is more conducive to the spread of communicable diseases.
"However, if full preventive measures are in place which we have in Singapore, then, these dormitories can be as safe as Singapore."
Of course, we won't be wrong to wonder how safe is Singapore?
Yes, many if not most businesses in the whole world are getting hit as cash flow slows and even dries up.
This explains the gigantic stimulus packages governments are pushing out.
In Singapore, we are likely to see a 3rd "Resilience Package" soon.
I understand your concerns and I share them.
There is a lot of doom and gloom and no one can tell for sure how long this will last.
However, we have to hope for a U shape recovery.
If it is a L shape recovery, it is pretty much another Great Depression.
My strategy remains unchanged in this murky environment and that is to stay invested and have a war chest (or a few) ready.
I have yet to deploy my war chests.
Reference:
Investors eat crusty bread with ink slowly.
Hi Ak,
Since you have bought previously Centurion at 40.5c, are you looking at buying more Centurion shares at current levels ($0.35/0.355) and what are your considerations in light of the current climate of presumed recovery from pandemic?
Thanks for talking to yourself.
Hi Blur Sotong,
Another reader asked this in one of my more recent blogs and I said I bought more at 32 cents a share. ;)
I will touch on this when I blog about my 4Q 2020 passive income in another couple of days. :)
Thank you very much. You are very lucky to buy at 32c a share before the Nov rise. The lowest I ever got was 35.5c. Need to learn from your fantastic and consistently accurate timing.
Hi Blur Sotong,
I agree it was partly dumb luck on my part. ;p
Anyway, I feel that 35.5c is a good price too and I may buy more if I don't have other investments to put money into. :)
35 cents now. I go buy now. 😂
Hi 好人,
It will take time but things will improve.
Unless we think that the business has weak fundamentals that will only get weaker, Centurion looks like a good investment to me at 35 or even 35.5 cents a share. ;)
I feel that there is a good chance of dividends resuming in 2021 even if there isn't any meaningful growth.
Crossing fingers. :)
Hi AK, as we approach Centurion 2020 full year results reporting, do you foresee them restoring their dividends back to full year 2c? Even on a 2c dividend payout, their payout ratio is in the lean 20percent or so? Doesn't it seemed a bit stingy to still cut it? From what I understand, they used the 1c dividend for 2H 2020 to prematurely pay off the notes which reduces their debt. That I guess is a good thing.
I did a back of envelope calculations based on 2019 numbers for contributions from PBSA in Australia and UK of 30% contributions to top line revenue. When writing off their contributions, PE only goes up from current 3 to 5. In my opinion, Centurion is really cheap even taking into non contributions of UK and Australian PBSA.
Consistently over the quarters and whole year (2018-2020), gross profit is about 72-74percent of revenue. Tells me that profitability notwithstanding the pandemic, centurion seems pretty efficient.
Based on the above numbers, I am pretty happy with how Centurion is being run.
It is quite depressing that Mr Market remains moody over Centurion for quite a few moons. Let's hope that his mood will pick up after the results.
Hi Blur Sotong,
As you have observed, Centurion is a well managed and profitable business.
Centurion delivers respectable results even when things look bad.
Centurion has been undervalued in recent years and most definitely it is undervalued now.
I would like to see dividends restored because Centurion can afford it but the COVID-19 pandemic is still raging.
So, I don't mind that Centurion err on the side of caution and if the management wants to pare down more debt, it is not a terrible idea.
Mr. Market will do what he wants to do, of course. ;)
Hi Assi,
Last evening, Centurion issued a profit warning. Seemed like we are not out of the woods just yet. A silver lining is that UK is planning a phased relaxation of their control measures. At least it gives visibility for students returning to their universities.
Hi Blur Sotong,
Definitely not out of the woods yet.
However, I am quite comfortable with staying invested in Centurion Corporation which is a very well run company, everything taken into consideration.
The COVID-19 situation will improve over time.
I like to think that patience will be rewarded. :)
Hi AK71,
Centurion FY2020 results just out. As earlier announced in the profit warning, the loss is due to a drastically reduced valuation of their assets. So their earnings per share ended up as a loss per share. But earnings per share based on core businesses went up. So that is encouraging. Disappointedly, no dividends for FY2020.
Hope the fair value of their assets will go back up soon.
Hi Blur Sotong,
To investors for income, fair value gain or loss on assets isn't as interesting as cash flow from operations.
I am OK with Centurion not declaring dividends and using the funds to pare down debt instead.
They have shown their willingness to reward shareholders in the past and with a stronger balance sheet when things improve, I am sure dividends will resume.
Hi AK, please talk to yourself regarding the latest profit warning report fr Centurion. Doesn't seemed to have any end in sight. At the current rate, do you think Centurion will sell away some or all of their PBSA?thanks for talking to yourself.
Hi Blur Sotong,
With the pandemic still going on with limited movement of people around the world, I would be surprised if Centurion's core business which is centered on accommodation for foreign workers and students exceed expectations.
With demand from investors for PBSA assets on the rise, I doubt that Centurion would sell any related assets but if they do, I expect them to fetch very good prices.
It is always darkest before the dawn and this is a waiting game.
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