Pan United Corp.
Target Price (SGD) 1.26
Closing Price (SGD) 0.970
•BBM results were a little muted as the Construction Industry faced greater enforcement of regulations including shorter work hours, tighter labour supply and prolonged dengue checks. Demand however, has not changed and we expect activity to normalize going forward. Major infrastructure projects going forward are: Thomson MRT, Changi T4, New LNG Terminal, Sengkang General & Community Hospital, Pasir Panjang Terminal Phase 3, Marina One, TP180. So while the muted 3q13 contribution shaves our overall group estimates this year from 8.8c to 8.2c, we raise them next year from 9.2c to 9.8c as job delays now simply means they get done later.
• Volumes at CXP are tracking an annual increase of 2% as weakness in steel volumes (-9%ytd) are made up for by logs (+12%ytd) and paper & pulp (+5%ytd). CXP management continues to explore expanding the warehousing business, and of diversifying into a 5th cargo.
• Shipping remains marginally profitable as although vessel utilization is at 89%, journeys are not cargo laden in both directions. Revenue per vessel per day is 55% peak.
We maintain our Accumulate Rating on Pan United with a marginal change in target price of S$1.26 from S$1.27, as a result of our backloading of earnings estimates as mentioned. PUC remains a long term buy given: (1) its 30% market dominance in ready mixed concrete market, makes it a compelling proxy to Singapore’s multi-year infrastructure boom; (2) CXP is a good proxy to China’s economic growth; (3) PUC generates strong free cash which enables it to reward investors with yield as well as allows them to make new value accretive investments.