Brokers' take: CGS-CIMB initiates Pan-United with 'add' on construction upcycle

READY-MIX concrete (RMC) supplier Pan-United Corp is likely well positioned to ride on the strong recovery in the construction industry with its large market share in Singapore, said CGS-CIMB.

In a report on Tuesday (Mar 29), CGS-CIMB's research team initiated its coverage on Pan-United with an "add" call and target price of S$0.56, noting that the counter's current valuations - at 3.9 times the brokerage's estimates for its FY2023 enterprise value multiple - look attractive.

The research team's target price is pegged to 6.6 times the brokerage's estimates for Pan-United's FY2023 enterprise value multiple.

Shares of Pan-United were trading at S$0.40 at 9.29 am on Wednesday, up S$0.015 or 3.9 per cent.

CGS-CIMB expects Pan-United to maintain its market share of around 40 per cent via its integrated value chain and strong product capabilities, with its research and development capabilities and sustainability efforts.

The company should also see a strong demand for RMC from 2022 to 2024, as construction works pick up amid mounting backlogs due to pandemic delays and easing foreign labour shortage.

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Some notable projects that can spur demand include Changi Airport Terminal 5 and expansion plans for the integrated resorts, as well as construction of the Cross Island MRT Line, berth and jetty facilities at Tuas Terminal and Jurong Island, and the Tuas water reclamation plant.

As Pan-United is also one of the leading providers of sustainable concrete products in Singapore, it should benefit from Singapore's shift to becoming a low-carbon economy.

The research team expects the company will be able to sustain a 5.4 per cent dividend yield given its strong cash-generating capabilities and net cash position.

It expects concrete and cement revenue to grow 21 per cent on year as construction activities resume across the company's key markets, while earnings per share will likely grow 31 per cent in FY2022.

READ MORE:

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