Thursday, August 15, 2013

Pan-United : Some doubts linger on (CIMB)

Current S$0.91
Target S$0.90
Some doubts linger on

 PAN’s reported 2Q13 numbers are satisfactory.However, the recent increase in its CXP stake suggeststhat it has regionalambitions. Although weare positive on CXP’s future earnings contribution, we question the seemingly high acquisition price.

1H13 EPS is in line, at 52% of our FY13 forecast and slightly below consensus at 47%. We keep our FY13-15 EPS and residual income-based target price unchanged. We maintain our Neutral rating as we think that the stock’s near-term potential has been priced in. The main theme for PAN now is the latest CXP acquisition's earnings contribution. We will elaborate on this post-analyst briefing.

2Q13 results in line
PAN’s 1H13 revenue was up 4% yoy to $357m, driven by the BBR division but partly offset by lower trading activities from the shipping division. In 1H13, the port division maintained healthy levels of revenue and cargo volume. There was a S$2.2m provision for doubtful debts related to one of the main contractors of the Downtown Line 2 project that filed for insolvency in 2Q13. Dividends of 1.5Scts/share were declared (28% payout ratio based on the 1H13 interim results).

Raised CXP stake to 85.5%
PAN entered into a sales and purchase agreement with Macquarie International Infrastructure Fund Limited (MIIF) to acquire 18m shares in Singapore Changshu Development Company Pte Ltd (SCDC) for S$101m in cash. This will raise PAN's effective shareholding in Changshu Xinghua Port Co Ltd (CXP) from 51.3% to 85.5%. The rationale for the higher stake is to build up its port and logistics division, which is in line with its plans to increase revenue streams. Internal funding and debt will be used to fund this acquisition.

Neutral for now
We are net neutral on whether PAN divests or adds to its existing CXP stake. The latest acquisition price seems to be on the high side at 20x historical P/E. We will provide more details post-analyst briefing. Other near-term catalysts appear priced in. and we maintain our Neutral rating for now.

Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date: 15/08/13

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