At this level, the demand for this key building material - in which Pan-United is the largest supplier in town with a market share of around 40%- is tracking the upper range of the full year forecast of 15 to 16 million tonnes.
Ong points out that historically, demand in the second half of the year tends to be stronger.
"As such, we think 2026 demand could reach or surpass BCA’s RMC demand forecast, in line with our 2026 ready-mixed concrete forecast of 16.5 million cubic metres," she says.
Ong notes that ready-mixed concrete players have largely been able to pass on the higher cost of cement, with prices rising 14% y-o-y to $136 per tonne versus the 16% y-o-y increase in cement prices over the January to March period.
The industry has been flagging that operating costs have been rising, no thanks to higher energy costs because of the fighting in the Middle East.
Ong points out that the majority of the company's contracts with customers are based on variable/indexed prices.
"As such, we believe that Pan-United has been able to raise average selling prices to pass through the majority of inflationary costs, keeping margins largely protected, giving it an edge compared with its building material/construction peers who have a larger proportion of fixed-price contracts," she says.
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Now, given the inflationary environment, she warns that the company could face a slight deterioration of cash balances and accounts receivable build-up as higher input/operation costs result in higher working capital needs.
In its AGM minutes published on May 15, the company says that apart from assessing its customers’ creditworthiness, it purchases credit insurance on most of its customers, protecting itself in the event of non-payment.
Meanwhile, Ong believes that the company's net cash, at a "healthy" $93 million as at end of FY2026, will support her 60% payout ratio assumption, which translates to 50% jump in dividend per share for FY2026.
In addition, the company has been supporting the share price with buybacks amounting to 807,700 shares as of June 4, or 0.15% of its outstanding shares. It only obtained the mandate to do so on April 23
Ong has raised her valuation multiple on the stock from 7.4x EV/Ebitda, which is based on 0.5 sd Pan-United's historical level, to 9x FY2027 EV/Ebitda, which is 1.4 sd above the 14-year forward level.
She remains upbeat on this stock, given its strong positioning, which should help it capture construction tailwinds, supported by improved balance sheet strength.
For Ong, re-rating catalysts include strong industry volume growth and sustained margin strength.
On the other hand, downside risks include counterparty credit risks and a slowdown in project offtake volumes, thereby negatively impacting ready-mixed concrete sales and margins.
Pan-United Corp shares, as at 2.04 pm, traded at $1.50, up 2.04% for the day, extending a gain of 28.41% year to date.
