The building frenzy fuelling the backsides-in-beds business

In this issue:

• Centurion’s maybe-Reit and Wee Hur’s maybe-special dividend
• DBS shares reach another record high

Good morning, BT readers. 

2024’s winners are becoming 2025’s winners, the way this year is starting out. 

Last week, DBS shares hit S$45 for the first time, Centurion Corporation surged more than 6 per cent on news of its potential real estate investment trust (Reit) listing, and a special dividend might be in the offing for Wee Hur Holdings’ shareholders. 

Banks might’ve hogged the limelight last year, but Centurion and Wee Hur absolutely killed it in 2024. The two counters respectively delivered 149.4 per cent and 122 per cent in total returns last year, according to Singapore Exchange (SGX) data. This placed them among the top five performers of the exchange’s 100 most actively traded stocks.

Both firms, coincidentally or not, are in the business of lodging for workers and students.

What’s happening?

2025 is shaping up to be an action-packed year for Centurion. The company, one of Singapore’s largest dorm operators, is considering a mainboard Reit listing that will comprise some of its workers and student accommodation assets, it said last week.

As things stood last November, Centurion had S$2.1 billion in assets under management and 66,660 operational beds across 34 properties. The bulk of the beds are in Singapore – almost 35,000 in the worker lodging segment – followed by Malaysia, with a little over 27,000 beds for workers.

Details on the potential listing are sparse, given its nascency, but Centurion’s portfolio offers a glimpse of what could be headed investors’ way. The company has nine workers’ dorms in Singapore and eight in Malaysia. On the student lodging front, it has 17 such properties in the UK, US, Australia and China.

Why it matters

Workers’ housing, which brings in 77 per cent of Centurion’s revenue, occupies a classic sweet spot of high demand and constrained supply in Singapore. 

Already, the migrant worker population is at a record high, and demand for manpower will not ease any time soon – Resorts World Sentosa and Marina Bay Sands are expanding their stately pleasure domes here and work on Changi Airport’s Terminal 5 begins this year. 

If you feel like the soundtrack of your Singapore existence is all jackhammers, you’re not imagining it. From 2025 to 2028, there will be an estimated S$31 billion to S$38 billion worth of construction taking place per year. 

At the same time, the supply of worker lodging has been tight. Centurion’s purpose-built workers’ dorms in Singapore had a 99 per cent financial occupancy rate in the first nine months of 2024. Its rival Wee Hur’s Tuas View Dormitory, the group’s first purpose-built dormitory here, had an average occupancy rate of 95 per cent in 2024, the company said last August.  

On the other side of the Causeway, favourable winds are also blowing in Centurion’s favour. CGS International analysts tapped Centurion as a “clear beneficiary” of the new Johor-Singapore Special Economic Zone (JS-SEZ).  

Since then, prospects have brightened further. The economic zone has set its sights on attracting an ambitious 100 projects within 10 years. That’s a whole lot of hammers and hard hats, and more than half of Centurion’s workers’ dormitories in Malaysia are in Johor. 

The student housing end of Centurion’s business is worth a gander, too. The purpose-built student accommodation segment might only account for 7 per cent of the company’s operational beds, but it punches above its weight, bringing in 24 per cent of group turnover in the first half of 2024.

Interestingly, fellow lodging provider Wee Hur has been cashing in on its own student accommodation portfolio. Last month, it sold the seven-property Australian portfolio that it jointly owns with GIC in a deal that is expected to net it S$320 million when it concludes by June this year. It will retain some indirect exposure to the properties through its subsidiary’s 13 per cent stake in the new owners.

Speculation about the sale had boosted the stock’s share price last year, but PhillipCapital thinks there’s room for more of a run-up. Earlier this month, the research house initiated coverage on Wee Hur with a “buy” call and a target price of 62 Singapore cents. The counter ended last week at S$0.45. 

“Given the group’s track record of declaring special dividends during strong financial performance, we believe there is a strong likelihood that special dividends may be announced,” the PhillipCapital report said.

Post-sale, Wee Hur’s portfolio will include two workers’ dormitories in Singapore and a 409-bed student accommodation asset in Sydney that is slated to start operations in the first semester of 2025. It is also in the process of developing a 700-bed asset in Adelaide.

Intriguingly enough, The Straits Times’ senior columnist Ven Sreenivasan raised the prospect of Wee Hur’s own Reit listing last week. Referencing Centurion’s proposed Reit, he wrote: “If Wee Hur follows suit, it could reap at least another S$500 million, while the total valuation of the company would be S$1 billion.”

That would be music to SGX’s ears. Last year, the exchange saw 20 delistings, and this year might not be any better. Perhaps all the construction work in the pipeline will indirectly boost equity market activity, too.

In which case, drill, baby, drill.

The big number: S$45

DBS shares crossed the S$45 mark for the first time last week after breaking multiple share price records last year.

The banking sector was the darling of the market in 2024, and the bevy of activity expected from the JS-SEZ will fuel bullishness on the industry in 2025.

“Both Malaysian and Singaporean banks could facilitate more investment and trade, with UOB and OCBC having sizeable operations in both markets,” Macquarie analysts said. 

Higher-for-longer rates and a robust wealth management business also have analysts expecting earnings growth in 2025, albeit at a slower pace. 

The market will doubtless keep a gimlet eye on banks’ dividends, especially after DBS announced a mega share-buyback programme last November. Investors won’t have to wait long – the bank is expected to report its full-year earnings next month.

(Disclosure: I own shares in DBS.)

5 big reads

• The wayang of board evaluations As we enter another corporate reporting season, the ritualistic dance of board evaluations takes centre stage.
• Companies should do away with having an executive chairman The individual might get too involved in the group’s operations.
• Manulife US Reit to post FY2024 loss as its portfolio value falls 9.3%; divestment talks continue Its net asset value is down US$116.6 million to US$1.1 billion.
• Suntec Reit unitholders should reject revised S$1.19-a-unit offer: Morningstar The revised offer is below Morningstar’s fair-value estimate of S$1.38 a unit.
• Chinese investors chase returns abroad as local markets struggle “Investing in Chinese stocks has been a painful experience for investors.”