10 Things I Learned From Centurion Corporation's (Westlite) 2020 AGM

Centurion Corporation (SGX: OU8) came under fire when a large number of migrant workers in Singapore were infected with COVID-19.

A few of Centurion’s worker dormitories were classified as hot spots for the contagious disease and were subsequently gazetted as isolation areas.

To make matters worse, the plight migrant workers are facing has caught the attention of both local and international media.

Critics have pointed out that migrant workers in Singapore are mistreated, underpaid, and have to endure poor living conditions in cramped spaces.

Being one of the largest providers for worker dormitories in Singapore with 28,000 beds, Centurion plays an important role in providing living facilities to many of the unsung heroes who have made tireless contributions to Singapore’s overall development.

Thus, I tuned in to Centurion’s virtual AGM to find out if the various accusations levelled at Centurion from different media sources were true.

Here are 10 things I learned from the 2020 Centurion AGM.

1) The State of Migrant Worker Dormitories in Singapore

Most worker dormitories in Singapore are not as cramped and unhygienic as depicted by the media

According to CEO Kong Chee Min, worker dormitories are normally well-maintained.

As a licensed dormitory operator in Singapore, Centurion must follow the pre-prescribed standards and guidelines for dormitories issued by the Ministry of Manpower. Else, there will be hefty fines for the licensed dorm operators.

2) Similarities Between Purpose-Built Dormitories and Public Housing in Singapore

The building structure and layout of a purpose-built dormitory is similar to public housing in Singapore.

Each dormitory unit is designed to accommodate 10, 12 or 16 workers, depending on the size of each apartment.

Migrant workers living in purpose-built dormitories only need to share cooking utensils and toilets with fellow residents living in the same unit.

According to the CEO, the workers love to cook and eat together with their fellow roommates.

So it is a misconception that migrant workers in Singapore have to live in extremely cramped spaces and share facilities on a massive scale.

(At the same time, this is not to say that some workers are subject to abuse — I believe there were cases where they are mistreated. Hopefully, the government will clamp down on any errant practices.)

3) Possible Government Review of the Living Conditions of Migrant Workers After COVID-19

Securities Investors Association Singapore asked the management if there would be any changes to its dormitories once the pandemic is over.

The management believes that Singapore will continue to rely on migrant workers. Hence, should the authorities conduct a review on the housing needs of migrant workers, there might be changes to purpose-built dormitories.

A revamped purpose-built dormitory can offer better living conditions and amenities including the provision of a gym, pool table, basketball court, badminton court, barbershop, ATMs, etc.

Such communal facilities allow migrant workers to fulfil their basic needs and socialise with their peers while far away from home.

When the DORSCON alert was raised to Orange, Centurion suspended the usage of all communal facilities and mass gatherings across its dorms.

Thermal scanners were deployed for mass screenings, and disinfectants and thermometers were given out to all residents.

Centurion also provided free WiFi for migrant workers to keep in touch with their families when Singapore imposed the circuit breaker measures.

4) Precautionary Measures Taken by Centurion Corporation Before the COVID-19 Outbreak

Prior to the outbreak, Centurion had already stepped up the cleaning frequencies across its dorm facilities and provided migrant workers with personal protective equipment to prevent the outbreak.

Despite the efforts, a worker may still contract COVID-19 at their worksite or when they visit public places like Mustafa during their off days.

As a carrier of the virus may be asymptomatic, he may unknowingly infect the rest of his roommates. This led to the outbreak and the rest is history.

5) 2 out of 25 of the Foreign Worker Dormitories Gazetted as Isolation Ares in Singapore Belong to Centurion

Westlite Toh Guan and Mandai were the two hotspots with more than a hundred confirmed cases each.

Centurion also has a dormitory business in Malaysia with 30,700 beds.

Fortunately, there haven’t been any confirmed cases of COVID-19 reported in its Malaysia dormitories.

6) Centurion’s Overseas Student Accommodation 

Apart from worker dormitories, Centurion also provides student accommodation with a total capacity of 2,852 beds in Singapore, South Korea, Australia, the United Kingdom, and the United States

Other than one confirmed case of COVID-19 at its U.S. student dorm, there are no other confirmed cases at its other student accommodation locations.

7) Impact of the COVID-19 Pandemic on Student Dormitories Worldwide

The COVID-19 pandemic has affected the demand and occupancy rates across dormitories worldwide due to travel bans and movement restrictions

The management expects hits on occupancy rates to be harder on student dormitories than on worker dormitories in the short term. This is because no migrant workers were sent back to their home countries during the lockdown.

For student accommodation in the UK, Centurion expects a decline in revenue of £3-5 million (~$5.24 – $8.74 million) which is about 4-7% of FY2019 revenue due to early lease terminations.

As for the impact on profit, the company was unable to comment.

8) Revaluation Gain of $70 million in Fiscal Year 2019 (FY2019)

There was a revaluation gain of $70 million in FY2019 which shareholders questioned due to its size.

The management replied that the independent valuer considered the land lease extension of another 25 years to 2057 for its Westlite Toh Guan dormitory, which has obtained government permission for redevelopment.

Also, worker dormitories fetch higher values compared to light industrials.

9) Centurion’s Low-interest Coverage Ratio in FY2019

Centurion had a low-interest coverage ratio of 2.8 in FY2019.

With earnings expected to decline further, some shareholders were concerned that interest coverage would fall further.

However, the management was unable to give an exact interest coverage ratio for FY2020. They reassured shareholders Centurion would still be able to pay its interest payments when they fall due.

10) Shareholders Should Expect a Dividend Cut for FY2020

Centurion has been paying a regular dividend of two cents per share over the past few years.

However, COVID-19 has caused the world economy to come to an almost complete standstill.

According to the CEO, the company needs to survive this crisis by suspending dividend payouts if necessary, deferring redevelopment plans for its Toh Guan asset, and for its directors and senior management to take a voluntary pay cut of 10-15%.

Having said that, the management remains confident of the long-term fundamentals of its student and worker dormitory business and the recovery post-pandemic should be fairly quick.

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