• Pan-United Corp is Singapore’s largest supplier of ready-mixed concrete (RMC).
• Boosted by strong sales volume growth and RMC selling prices, Pan-United’s S$9.1m NP in 1H19 was higher than the past three years’ full-year NP levels.
• Pan-United also plans to leverage its portfolio of over 300 specialised concrete products to drive growth in coming years. It is trading at 15.4x TTM P/E.

Pan-United Company Background

• PAN-UNITED CORPORATION LTD (SGX:P52) is Singapore’s largest provider of ready-mixed concrete and cement as at 2016, according to the company’s annual report. The company also has presence in Vietnam, Malaysia and Indonesia. Its concrete and cement businesses are vertically integrated with aggregate quarrying and logistics services to optimise efficiency of the value chain.
• The company serves both public and private sector clients in diverse areas including industrial and infrastructure, commercial, institutional, educational and residential projects.
• The company also has a trading and shipping segment, relating to coal trading, bulk shipping and agency operations.

Construction Sector Demand Started to Recover in 2018

• According to the Building and Construction Authority (BCA), total construction demand in Singapore recovered in 2018 (S$30.5bn, +23% y-o-y) after three consecutive years of declines. BCA projects the total construction demand in 2019-20 to range between S$27bn-34bn p.a., due to sustained public sector construction demand.
• Given a typical time lag of 1-2 years between contracts being awarded and the rollout of projects, management expects RMC industry demand to rebound in FY19F.
• See also the recent SGX Market Update: Singapore's Construction Sector Continued to Grow in 3Q19.

Riding the Uptrend of RMC Prices

• Due to higher raw material costs, RMC price has been on an uptrend. As of Aug 2019, RMC price YTD rose 9.8% y-o-y, according to BCA. Management thinks there may be further upside to RMC prices in 2H19F if raw material prices continue to remain high.
• Helped by stronger sales volume growth and selling prices of ready-mixed concrete in Singapore, Pan-United recorded net profit of S$9.1m in 1H19, higher than the full-year net profit levels it recorded from its continuing business over the past three years.

A Suite of Specialised Concrete Products

• Pan-United is one of the few concrete companies in the region that actively carries out R&D. Since 2012, Pan-United has developed over 300 specialised concrete products, including solutions to facilitate urgent repairs of airport runways as well as for use in wastewater treatment plants and facilities.
• According to management, the specialised concrete products currently only account for a small portion of revenue, but command higher margins compared to traditional concrete products. Pan-United believes that it can further leverage its product portfolio to drive growth in coming years.

Historical Valuation

• As of 14 Oct 2019, PanU was trading at 15.4x TTM P/E and 1.12x P/BV.

Source: CGS-CIMB Research - 15 Oct 2019