I once became a construction worker (read the article here).

For all of 24 hours.

I carried poles, woke up at 5am with the rest of them, and visited their dormitories, sleeping just next door to them. (For regulatory purposes, I could not directly sleep in the dormitory provided to these foreign workers.)

It was only when I visited it when I finally realised how much money Centurion stood to earn.

Walk in, and the dorms are surprisingly airy, and spacious. It’s unlike what you might have read in the papers.

Sitting with the workers, and chatting with them about life, one realised how alike we were. They were just like me. One had dreams of becoming an engineer, but along the way, they needed to provide for their family.

But what stood out the most was how grateful they were to be in Singapore. I’m not trying to be patronizing and say how great Singapore is. But they revealed how life was much worse where they came from, with few opportunities to earn enough money to feed their families.

Yes, the jobs here we give are under the sweltering hot sun, and very menial.

But what it gives is a chance for these workers to build up their families, and their savings, and hopefully seek a better life eventually.

That’s how I’ve personally rationalized the Centurion investment, especially when it initially seems that they are making a lot of money off accommodating foreign workers, especially when these foreign workers are already earning so little.

You might be here wondering whether you should invest in Centurion, especially when prices have run up quite a lot over the past few weeks.

But here’s why you might still want to consider them, even after the run up in price.

Thinking about Centurion's history

Sitting in the swanky Raffles City Convention Centre on level 4, one could not help but take note of how unassuming and humble the Board was, despite their many achievements.

You might not have known this, but Centurion was previously known as Summit Technologies, and they were in the business of optical disk printing.

Remember the times when you needed to slot in a disk into your CD player? All that changed with the advent of streaming.

Now, they had to reinvent themselves. In August 2011, they did a reverse takeover of Centurion, giving them an immediate foothold in the growing worker dormitory industry.

And the younger CEO Mr Kong Chee Min, successfully achieved a reinvention of the business. None of this is simple.

And now, CEO Kong is older, but clearer still a wise pair of hands in the business.

Hearing him and his board share, I was convinced of three things.

Positioned at the lower end of the price spectrum for worker’s affordability

Many shareholders at the AGM were focused on the usual things.

Dividends, the upcoming REIT, and their new sources of growth.

I found a tiny nugget of insight though, in their response to shareholders last year.

As part of the Group’s commitment to foster long-term relationships with valued customers, the Group has persisted to provide competitive and affordable rental rates.

While prevailing rents in Singapore generally fall within the range of 500 to 600 per bed per month for purpose-built dormitories (PBDs), we have chosen to position ourselves at the lower end of this spectrum, currently charging at about S$500 per PBD bed per month.

• 2024 Response to Shareholders, published on SGX

Centurion is positioned at the lower end of the spectrum, and that’s why they have had such strong earnings.

Compare this to Wee Hur, who also has been operating worker dormitories.

If you do a quick division of their revenue, and the number of beds, that’s $3224 per bed, per year.

But for Centurion, they reported in their Annual Report that the Singapore’s worker dorms contributed

S$176.1 million in FY 2024 revenue as compared to S$137.9 million in FY 2023.

Do a quick division, and that’s $4833 per bed, per year, and about $403 per month.

So how is it that Centurion is charging at the lower end of the market, but earned more per bed, per year?

One look at Wee Hur’s 2024 Annual Report and you would realise that Wee Hur’s worker dormitories is less occupied than Centurion’s. They have a 93% occupancy rate, compared to Centurion’s 99%.

So yes, you might charge less, but if you have more people, you earn more.

Future growth in the dormitory sector?

But what was also raised in the AGM was how tight the supply of new beds were.

Just look at the numbers below. There are 457k workers who need beds, but only 434k beds in the market.

The government has also been tightening regulations on how these dorms are built, so that there’s a better quality of life for these workers.

For example, Ministry of Manpower (MOM) recently opened a Tukang dorm to show operators what is truly possible.

Centurion shared that they were involved in 4 tenders for new sites, but they do not yet know the results of those bids.

What was interesting to me was that they were also very disciplined in their acquisitions. I asked about whether they looked at Avery Lodge (Blackstone eventually bought it at $750million) and Homestay Lodge (sold for 63.5m to BBR), but the Chairman laughed at how they were just outbidded by other bidders.

That shows discipline, and not wanting to overpay.

Of course, as an investor, you should be asking,

How much more profitable can Centurion be?

And to gain more profits, how active is Centurion at recycling its capital, given that Wee Hur did the sale of the student property portfolio?

A clear look at the numbers shows that Centurion has been achieving a higher return on capital, but where is that coming from?

Centurion is entering the bottom of the Hong Kong foreign worker and Chinese professional worker markets and making it asset light with master leases

What was interesting to me was that Centurion entered both Hong Kong’s worker dormitory market (via a master lease agreement), and created a new Living Sector asset class, entering the Xiamen market.

When I first saw the entry into the Xiamen market, there was the natural fear around the Chinese property market. They reported in their Q1 earnings that Xiamen was 40% occupied.

They also shared during the AGM that this was trading in line with expectations, given that they missed the Chinese New Year period where most would move.

But they are clear about their Xiamen City Home positioning. This is aimed at young professionals and fresh graduates.

They also shared in their SGX filing in July 2024 that

the first project comprises five blocks of newly constructed residential development, which the Joint Venture will enter master leases with the property owners for 20 years.

This is a master lease arrangement, and so Centurion is taking on none of the risk of owning these properties.

The REIT?

Of course, they were tight-lipped about the REIT. But they have formally announced that they are in discussions, and this should provide further momentum to the stock.

Should you buy at this price?

Well, a few years ago, no one would have thought that foreign worker dorms were even a good business.

But just look at how far it’s risen over the past few years. And what’s even more important to see is how bullish their own directors and board Chairmen have been at buying the stock.

I don’t know about you, but I know I would be stupid not to follow them.