SGD New Issue Review : Centurion Corp 5Y 5%

CENTURION CORP – SGD 5YR

ISSUER:   Centurion Corporation Limited
SERIES: 002
STATUS: Direct, unconditional, unsubordinated and  unsecured Notes
RATING:  Unrated
FORMAT: Reg S, S274 & 275 of SFA, issuance off S$500 Million Multicurrency Medium Term Note Programme
ISSUE SIZE: TBD
TENOR:   5 years
ISSUE DATE:   [ ] March 2015
MATURITY DATE:   [ ] March 2020
INITIAL PRICE GUIDANCE:  5% area
REDEMPTION AT OPTION OF NOTEHOLDERS UPON CESSATION
OR SUSPENSION OF TRADING OF SHARES: At par, in accordance with the Programme
REDEMPTION FOR TAXATION REASONS: Yes, in accordance with the Programme
PAYMENT: Semi-annual, actual/365 (fixed)
DETAILS: SGD250K/Multicurrency Medium Term Note Programme/Singapore Law/CDP
LISTING:  SGX-ST
JOINT BOOKRUNNERS: DBS and RHB Sec
TIMING:  This week’s business, as early as today
B&D: DBS

Credit Highlights:

–      Listed on the SGX with market capitalisation of S$[409] million as at [13 March 2015], Centurion Corporation Limited (“Centurion”) owns, develops and manages quality workers accommodation assets under the Westlite brand and five student accommodation assets under the Centurion Student Living brand. Centurion currently has a portfolio of 14 operational accommodation assets totalling more than 45,600 beds in Singapore, Malaysia, Australia and the UK.

–          For FY2014, Centurion reported its highest ever revenue of SGD84.4m, a 48% increase from FY2013. Net profit from core business also increased 63% y-o-y to SGD31.1m in FY2014

– New SGD 5Yr transaction for Centurion Corp announced on the back of strong reverse interest
– Initial Price Guidance: 5% area
– Issue Size: TBD

Centurion Corp updated their S$300 mio MTN programme to S$500 mio in Oct 2014, I do note that their market cap has not changed much since their last $100 mio bond issue back in 2013 and is still at S$ 400 mio.

Yet it is in vogue now with the ECB and their 1 trillion dollar spending spree so borrow as much as you can and “million” is too small so better make it a billion to look respectable.

Having said that, Centurion does have an interesting and steady business model which is hard to replicate although I am not sure about the worker dorm business these days in Singapore but they are moving up north into Malaysia with a new contract from the Penang government and forays into student accomodation in the UK. Their attempt at a REIT is stalling for some reason, with the idea floated about since early this year (maybe because of Budget 2015 ?).

Revenues are growing nicely and their 2014 results has been impressive. 4 analysts covering the stock have rated them a BUY.

The Centurion 5.25% 10/2016 is trading at 4.19% level the 19 months left to its maturity.

Thus 5 year at 5% to me is a tad tight for a small business even if they are going places with a REIT (that will be sold to the public at a decent profit for themselves – buy the stock ? ).

5 year interest rate swaps are at 2.16% today which gives us a credit premium of only 2.84% for 5 years.

Back in 2013, Centurion paid a premium of 4.38% for their 3 year note but, rates were much lower then and the 5 year rate was 1.57% in those days (about 0.6% lower than today).

Good luck with the 5%.

 

Related Post :

1 Oct 2013  SGD New Issue Alert : Centurion https://tradehaven.net/market/sgd-new-issue-alert-centurion/