Pan-United eyes exporting concrete to South East Asia

Vietnam is on its list.

According to CIMB, from its humble beginnings, Pan-United Corporation has grown into a building materials behemoth with diversified businesses in port logistics and shipping.

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Its credible growth initiatives coupled with sustainable dividends makes for a perfect long-term investment. PUC’s businesses span construction, port logistics and shipping.

Growth should stem from market-share gains in the concrete segment in Singapore and international expansion. We initiate coverage with an Outperform rating and residual-income-based target price, with catalysts expected from sound acquisitions.

Formed over 50 years ago, PUC’s businesses span basic building materials, port logistics and shipping. It is the largest supplier of cement and concrete in Singapore, with around 30% of the market, based on volume.

Business astuteness had led to the establishment of a port in China in 1997; after 20 years, this is now one of the top 1o river ports in China. PUC also operates a fleet of tugs and barges to transport basic building materials in the region.

The local construction industry will be kept busy by a slew of upcoming private and public projects. We estimate average construction output of S$27bn-31bn annually, translating into a potential market of S$2.4bn-2.5bn for the materials industry.

We expect PUC to galvanise its expertise in specialty concrete to entrench its market leadership in Singapore. In addition, management has set its sights on exporting its concrete expertise to other South-East Asian countries like Vietnam, which could raise PUC’s growth potential in the longer term.

PUC had consistently paid around 60% of its earnings in the past five years. PUC is currently dishing out 3.5 Scts/share of dividends. We think there is scope for it to increase its dividends, backed by its strong cashflow generation. We think its share repurchase programme should also provide price support, limiting downside.