• Leading ready-mix concrete (RMC) player in Singapore with c.40% market share. Pan-United Corp is the largest ready-mix concrete player in Singapore with an estimated 40% market share. As such, we see it as a beneficiary of Singapore’s construction activities going forward, as it has high exposure to, and is a strong beneficiary of, construction activities in Singapore. According to the Building and Construction Authority (BCA), Singapore’s total construction demand is forecasted at SGD31-38bn pa from 2025 to 2028.

• Strong construction demand this year. The BCA has forecasted total construction demand of SGD32-38bn for 2024. It also expects demand for RMC volume to grow from 12-13m cu m, compared to 12.25m cu m in 2023. This is led by public sector demand of SGD18-21bn, driven by public housing and infrastructure projects including Housing & Development Board (HDB) build-to-order (BTO) projects, Cross Island Line (CRL) Mass Rapid Transit (MRT) contracts, Tuas Port development, Changi Airport Terminal 5, and other major road enhancement and drainage improvement works. The private sector construction demand is projected at SGD14-17bn, mainly from residential property developments under the Government Land Sales, expansion of the two integrated resorts, development and redevelopment of commercial, mixed-used and industrial properties and facilities.

• Could benefit from Johor-Singapore Special Economic Zone (JS-SEZ). Pan- United has a concrete batching plant in Johor, Malaysia, established since 2015 that serves the local market. With the development of the JS-SEZ over the next few years, we see Pan-United as a long-term beneficiary in the supply of RMC and building materials for the increased construction within the zone, that includes data centres, semiconductor factories and industrial parks.

• Positive 1H24 results. 1H24 revenue and core earnings came in at SGD384m (+7% YoY) and SGD19m (+22% YoY). Revenue growth was led by higher selling prices as volumes remained relatively flat. Gross margin was stable at 21.6% (+0.3ppt), while EBIT margin grew 1.1ppts to 6.1% due to operating efficiencies and leverage. Particularly, staff costs declined 2% to SGD30m while operating expenses grew just 6% YoY to SGD19m.

• Valuation. Pan-United currently trades at 9x FY24 P/E according to Bloomberg data vs peer average at 10x. Forward P/E is also below its 3-year average of 7x or near -1SD of its mean. Dividend yield is decent at c.5%.

• Key risks. As Pan-United supplies RMC to construction projects in Singapore, key risks to earnings would be a slowdown in construction projects and activities, as seen during the COVID-19 lockdown period in 2020.

Source: RHB Research - 12 Sep 2024