Is Centurion (SGX:OU8) Fairly Valued After Launching Its First Sustainability Notes?

Centurion (SGX:OU8) has priced its first sustainability notes under a refreshed SGD 750,000,000 multicurrency debt issuance programme, introducing 5 year SGD 200 million fixed rate instruments aimed at funding green and social projects.

Centurion's recent sustainability notes come as the stock trades at SGD1.59, with a 1 day share price return of 1.92% and a 90 day share price return of 8.16%, while the 5 year total shareholder return of over 5x hints at momentum that has been building over a longer period.

Compare Centurion's move into sustainable financing with a curated 299 resilient stocks with low risk scores that also leans on balance sheet strength and measured risk profiles.

Centurion now has fresh sustainability funding in place and a share price at SGD1.59, while analyst and intrinsic estimates sit higher. The next step is to see where fair value plausibly lands within that spread.

Price-to-Earnings of 19.8x: Is it justified?

Centurion trades on a P/E of 19.8x, which sits above both the Singapore real estate industry average and its direct peer group, even though the stock is trading 5.9% below an intrinsic value estimate and at a discount to analyst targets.

The P/E ratio compares the company’s share price with its earnings per share. For a business like Centurion, which generates recurring income from accommodation assets, the P/E helps investors frame how much they are paying for each dollar of current earnings.

Analysts expect Centurion’s earnings to grow 19.4% per year, which is faster than the wider SG market forecast of 7.9%. That kind of growth forecast can help explain why the market is willing to pay more than both the 13.3x industry average and the 16.9x peer average. However, when compared with the estimated fair P/E of 20x, the current 19.8x level looks very close to what regression based models suggest the market could converge towards over time.

Against that backdrop, Centurion’s P/E of 19.8x looks rich compared with the sector, yet broadly aligned with an estimated fair ratio that anchors the stock near what some models consider a justified earnings multiple.

Explore the SWS fair ratio for Centurion

Result: Price-to-Earnings of 19.8x (ABOUT RIGHT)

However, there are still risks around Centurion. These include potential shifts in accommodation demand across its key markets and execution challenges in deploying new sustainability funding efficiently.

Find out about the key risks to this Centurion narrative.

Another View on Centurion Using the SWS DCF Model

The earlier P/E discussion suggested Centurion is trading close to a fair ratio. The SWS DCF model adds a slightly different angle. It points to a future cash flow value of SGD1.69 per share, compared with the current SGD1.59 price, which indicates the stock is modestly undervalued. For you, the question is whether that SGD0.10 gap fairly reflects the risks around growth, funding and cash flows.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Centurion for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 262 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With Centurion showing both optimism around rewards and clear risks on the table, it makes sense to review the numbers yourself and move quickly to shape your own view. To weigh both sides in one place, start with the 3 key rewards and 3 important warning signs.

Looking for more investment ideas beyond Centurion?

If you want to broaden your perspective beyond Centurion, you can use the Simply Wall St screener to find stocks that fit your goals before the market does.

• Target quality at a discount by scanning for companies that combine solid fundamentals with attractive pricing through the 262 high quality undervalued stocks.
• Strengthen your income focus by reviewing dependable payers with higher yields using the 416 dividend fortresses.
• Limit potential downside by concentrating on companies that score well on resilience and financial robustness in the list of solid balance sheet and fundamentals (433 results).

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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