Following the release of concrete supplier Pan-United Corporation’s FY2024 ended Dec 31, 2024 results, CGS International (CGSI) analysts Kenneth Tan and Lim Siew Khee are maintaining their “add” call at an unchanged target price (TP) of 75 cents.
Tan and Lim note in their Mar 5 report that excluding a one-off $1.3 million associate impairment loss, Pan-United’s 2HFY2024 core net profit of $24 million was broadly in-line with their expectations, as was FY2024 core net profit of $42 million, at 104% of estimates.
Additionally, the analysts see the group’s sustained ebitda margin at 9.4% as a key positive. It is also above the historical FY2019 to FY2023 average of 7.3%.
For the 2HFY2024, Pan-United’s concrete revenue saw a slight growth of 11% h-o-h and 3% y-o-y, with stronger volumes estimated by Tan and Lim to be in the mid single-digit growth, which is in-line with Singapore ready-made concrete (RMC) industry figures partially offset by average selling price (ASP) weakness.
The group’s dividend per share (DPS) of 2.3 cents for the period and FY2024 DPS of 3.0 cents is also in-line with Tan and Lim’s estimate.
According to the Building and Construction Authority’s (BCA) 2025 outlook, RMC demand growth is expected to range from -3% to 8% this year.
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For 2025, BCA expects construction output to increase by around 5% y-o-y in view of a healthy project backlog, with construction contracts awarded to increase by about 13% y-o-y on the back of strong demand from the infrastructure and industrial sectors.
Beyond 2025, BCA sees medium-term construction demand from 2026 to 2029 remaining robust.
“We continue to view Pan-United as a key beneficiary of healthy construction demand given the group’s sizable exposure to public infrastructure projects; such projects tend to require larger proportions of specialised-grade concrete, which have higher ASPs and margins, in our view,” write Tan and Lim.
They add: “We believe FY2025 ebitda margin should remain elevated at around 9.3%, backed by improved operating leverage from rising industry volumes, and increased proportion of infrastructure projects benefitting sales mix.”
Re-rating catalysts noted by the analysts include strong industry volume growth and sustained margin strength.
Conversely, downside risks include counter-party credit risks and a slowdown in project offtake volumes negatively impacting RMC sales and margins.
As at 3.03 pm, shares in Pan-United are trading 1 cent lower or 1.60% lower at 61.5 cents.
