BUY S$0.965 STI : 3,180.25
Price Target : 12-Month S$ 1.21
Higher 3Q earnings despite flat topline ;
•3Q13 results in line; earnings growth helped by lower costs
•Muted earnings growth attributed to subdued construction activities this year
•Infrastructure outlook remains positive while construction pipeline remains robust
•Maintain BUY and S$1.21 TP
3Q13 earnings in line. Earnings for 3Q13 grew 6% y-o-y to S$12.3m on the back of flat revenues of S$184m. Operating margins improved to 10% helped by lower raw material and staff costs. 9M13 earnings now make up 68% of our full year estimate and PAN is on track to meet our FY13F earnings.
Subdued construction activities led to flattish 9M13 results. Growth this year has been flattish (9M13 revenue +2%, earnings -5%) due to subdued construction activities. PAN also provided for S$2.2m of doubtful debts due to insolvency of a main contractor in 2Q13, which contributed to lower 9M13 earnings. Stripping the doubtful debt provisions, earnings growth would have been flat.
Robust outlook for Singapore construction. Launch of new public construction projects has also been slow this year, but we expect activities to pick up going forward as more Thomson Line MRT project packages get awarded. Over the near term horizon, PAN is involved in the construction of Downtown MRT lines 2 and 3. Additional growth drivers should come from PAN’s anticipated involvement in the Thomson Line MRT projects next year.
Long term infrastructure projects in place. Longer term, project pipeline remains robust with the construction of more MRT lines, development of Terminals 4 and 5 and a new runway at Changi Airport, development of Southern Waterfront City including the Tanjong Pagar container port, container port terminals at Tuas and redevelopment of the existing Paya Lebar Airbase.
Maintain BUY and S$1.21 TP. Earnings remain on track to meet our estimates. Maintain BUY and SOTP-based TP of S$1.21.
Publish date: 13/11/13