Company Description

PUC’s  Basic  Building  Materials  business  commands  onethird  of  the  ready  mixed  concrete  market  in  Singapore.  Its Ports & Logistics division owns 85.3% of Changshu Xinghua Port,  a  top  10  multi-cargo  river  port  in  China.  It  also operates a Shipping fleet of 10 tug & barge pairs.

• 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  5 th 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.

Investment Actions

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.

Source: PhillipCapital Research - 14 Nov 2013