Pan-United's Port business to mitigate decline in construction output

Port earnings were at $16M in 2015.

Post earnings decline in Basic Building Resources (BBR) segment, while the port business has become increasingly important in terms of earnings contribution to Pan- United Corp.

DBS Vickers Securities notes that in FY14, port earnings were S$13m to BBR’s S$24m. Following decline in BBR earnings, FY15’s port contribution became more significant at S$16m to BBR’s S$12m.

According to DBS, port performance has been largely positive on higher volumes, utilisation.

Port EBITDA grew at 24% y-o-y to S$46m in FY15 on the back of 18% y-o-y revenue growth (to S$96m). 1H16 revenue reached S$45m (25% of group revenue) with earnings at S$8m.
Growth has been largely driven by higher cargo volumes. In FY15, volumes handled reached 12.2m tonnes (+13% y-o-y) driven by volume growth across all cargo segments (containers, logs, steel, pulp & paper and others).

As of 1H16, port utilisation rate reached 85% from 80% in 2H15. EBITDA margins have remained stable at 47- 48%.

DBS notes that while the port is capable of delivering stable volumes and earnings, we see growth coming largely from increased cargo volume and project equipment.
Higher-margin value-added businesses such as bonded warrehousing, port-to-door transshipment. As 80% of the port’s business is to domestic destinations outside of Changshu, there is also scope to increase its business with importers/exporters within the captive market of Changshu. It is exploring port management services as well. 

"We hence envisage growth to be steady. We see the port delivering stable growth from higher cargo throughput," said DBS.