Brokers' take: Phillip raises Pan-United TP to S$0.46 on construction sector recovery

CONCRETE and cement provider Pan-United Corporation P52 should see earnings pick up in FY2022 amid a recovery in the construction sector, said Phillip Securities Research.

In a report on Monday (Mar 14), senior research analyst Terence Chua raised his target price on the company to S$0.46 from S$0.44, and maintained a "buy" call on the counter.

He had raised earnings estimates of Pan-United by 11 per cent for FY2022, as he expects a higher demand for ready-mix concrete amid the construction recovery.

Shares of Pan-United were trading at S$0.345 at 3.31 pm on Monday, down S$0.005 or 1.4 per cent.

Chua expects Pan-United will be a key beneficiary of the construction sector recovery, given it has around 40 per cent of market share in the industry.

This comes as the Building and Construction Authority (BCA) upgraded its forecasts for construction demand for 2022; it also projected that demand for building materials will increase in tandem with the increased construction demand.

For FY2021, the company also paid full-year dividends of 1.6 Singapore cents, above its dividend policy, which Chua said "signals the group's confidence in its near and mid-term outlook".

Pan-United posted a net profit of S$18.7 million for the full year ended Dec 30, 2021, up from the S$1 million a year earlier. Revenue was up 45 per cent to S$586.9 million, largely driven by the group's concrete and cement business.

The results surpassed Chua's expectations, with net gearing falling below his forecasts, while dividend per share exceeded his estimates.

However, the analyst said manpower shortages, supply-chain disruptions and volatile freight costs will likely continue to hamper recovery in the company's growth, which may then affect its gross profit margins.

He expects prices of raw materials - which rose at a faster pace than average selling prices - would unlikely moderate in the near-term, given strong demand for construction materials in the region.

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