Pan United Corp poised to benefit from Singapore's construction boom

S$18b Thomson line is on track.

According to Phillip Securities Research, it is still positive on PUC as a play on Singapore’s construction boom as it closes the infrastructure and housing gap following 10 years of population expansion. 

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PUC as a leading supplier of cement and ready mixed concrete (29% and 33% market share) is a good proxy to this theme. Given its market share, why bet on individual contractors when you can bet on the dominant supplier? 2013 should see earnings resilience here, but 2014 could see a renewed burst of earnings as the S$18b Thomson line gets underway.

One of PUC’s key assets, its 51.3% owned top 10 river port in China – Changshu Xinghua Port – is also 38% owned by Macquarie Int’l Infrastructure Fund (valued by MIIF at S$106.6m) which recently monetized its other asset –Taiwan Broadband Communications – as the Asian Pay TV IPO (priced at S$510m vs S$493m NBV).

As MIIF in its strategic review has indicated that it will liquidate all assets and return capital to shareholders, there is a likelihood of them disposing the stake to PUC, which has right of first refusal.

PUC has enough balance sheet capacity (Cash S$98m, Debt S$72m, Equity S$375m) to make an all cash acquisition of MIIF’s stake in CXP, in which case EPS could potentially accrete between 0.5c to 1c per share.