Pan-United Corporation's CXP acquisition to improve FY14 earnings by 10%

CXP will contribute sustainable earnings.

Research firm DBS said that post acquisition by Pan-United Corporation (PAN) of an increased stake in CXP, the latter now contributes more significantly to PAN’s earnings (27% vs 18% previously).

"Based on our estimates, the acquisition is earnings accretive and will improve FY14F’s earnings by 10%. We visited CXP port to gain further insight to its operations and have confidence that CXP is capable of contributing a sustainable stream of earnings to PAN going forward," said DBS.

"We expect cargo volumes to be supported by robust log demand and expansion of steel and paper mills in the area. As there is no longer a requirement that was made by MIIF to pay out 100% of earnings as dividends at CXP’s level, management has more financial resources available to further develop the port in areas such as warehousing," it added.