PAN-UNITED CORPORATION LTD (SGX:P52)
Pan United Corporation - Gearing Up For Re-opening Ramp
- We expect Singapore to proceed with its re-opening plans, in spite of the new Omicron variant. And we think the pace of the pick-up in construction activities will accelerate as the industry play catch-up after two slow years impeded by COVID restrictions.
Ramp up capacity to meet increased demand
- As a dominant supplier of ready-mixed concrete in the Singapore market, Pan United (SGX:P52) is likely to ramp up capacity to meet with the increased demand in FY22E and FY23E. We are imputing higher operating costs to bring capacity back on stream, which will lower net margin to 3.8% for FY22E, from our earlier estimate of 5.0%. This lowers our earlier FY22E net profit estimates by 29%.
- Year-to-Sep, Singapore’s consumption of ready-mixed concrete is 82.7% higher y-o-y at 8.5m cu m, but this is still 7.4% lower than same period in 2019. In the first 10 months of 2021, total contract awards are 1.2x that of full year FY20, and 0.7x that of FY19. These awards will translate into construction work in the next 12 to 18 months.
- Nov ASP are 9.2% higher y-o-y at S$103/cu m and +7.2% vs Nov 2019. Prices jumped in July 2021 and have stayed elevated at the current level in the last 5 months.
- Baltic Dry Index are down 42% from Oct 2021 peak. However, given the strong re-opening demand in the region, we do not think prices of building material would moderate.
Maintain BUY at target price of $0.50.
- In spite of a revision in FY22E earnings estimate, Pan United's operations are cash flow generative, hence keeping the target price intact. At current share price of $0.32/share, Pan United trades at FY22E P/E of 8.1x, EV/EBITDA of 3.8x, and 1x P/B.
- See
Lim Shu Rong
SAC Capital Research
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https://www.saccapital.com.sg/
2021-12-17
SGX Stock
Analyst Report
0.500
SAME
0.500
