Friday, November 15, 2013

Pan-United: Simplicity is great (CIMB)

Pan-United Corp
Current S$0.97
Target S$1.08
Simplicity is great

▊ PUC continued to deliver good results that were still driven by the core Basic Building Material segment. We keep our eyes on a couple of expense items but think that the earnings boost will come through from enlarged CXP contributions. 3Q13 and 9M13 EPS are in line, at 30% and 84% of our FY13 forecast, respectively. We keep our FY13-15 EPS and residual income-based target price. The stock remains an Outperform, potentially catalysed by earnings contributions from very chunky MRT projects in the BBR segment and an improved earnings profile coming from its enlarged CXP operations.

Results yet to reflect greater contribution from CXP
PUC’s 9M13 revenue edged up 2% yoy to $541m, driven by the BBR division but partly offset by lower trading activities from the shipping division. From the numbers, we observed that the port division maintained healthy levels of revenue and cargo volume. As the acquisition of the additional stake in CXP was only concluded in Sep 2013, the increase in its share of profits is muted in these results, after accounting for related transaction costs.
Things to keep in mind
While the numbers in this set of results remain strong, we are reluctant to shift our estimates upwards for now, bearing in mind 1) the possibility of ad-hoc provisions given the recent DTL subcontractor insolvency case (after Alpine, for which PUC took a S$2.2m provision) and 2) higher financial costs in 4Q related to the CXP acquisition.  
Outperform maintained
Apart from the consolidation of CXP’s financials, other catalysts for the stock could include earnings contributions from chunky MRT projects (Downtown lines 2 & 3 and the new Thomson line). In this segment, PUC’s bread-and-butter BBR division is expected to maintain its sales volume of ready-mixed concrete.

Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date:13/11/13

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