Pan-United Corporation has reported 12% y-o-y higher earnings for the 1HFY2025 ended June 30 of $20.6 million.

 

Revenue for the 1HFY2025 grew 4% y-o-y to $401.1 million from &ldquo healthy construction activities in Singapore&rdquo .

 

The significant investments in property, plant and equipment in the last 12 months, resulted in a 21% y-o-y increase in depreciation and amortisation expenses.

 

Pan-United says that the general increase in the cost of doing business has led to higher operation cost, primarily staff cost and rental expenses. Included in the &ldquo other expenses&rdquo was a $2.5 million foreign exchange loss, largely unrealised, from the revaluation of US dollars cash and cash equivalents held on June 30.

 

The group&rsquo s ebitda grew to $41.1 million in 1HFY2025 driven mainly by the increase in revenue, while share of results of associate came down by 55% y-o-y to $0.7 million, affected by lower sales volume and selling prices.

 

As at June 30, the group has secured about $430 million worth of contracts to supply ready-mix concrete for the development of Changi Airport Terminal 5. These contracts have a duration of 5 years and they are not expected to have a material financial impact for the next 12 months.

 

The board of directors has declared an interim dividend of 1 cent per ordinary share for the reporting period.

 

Following the release of concrete supplier Pan-United Corporation&rsquo s FY2024 ended Dec 31, 2024 results, CGS International (CGSI) analysts Kenneth Tan and Lim Siew Khee are maintaining their &ldquo add&rdquo 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&rsquo 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&rsquo 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&rsquo 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&rsquo 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&rsquo s estimate.

 

According to the Building and Construction Authority&rsquo s (BCA) 2025 outlook, RMC demand growth is expected to range from -3% to 8% this year.

 

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.

 

&ldquo We continue to view Pan-United as a key beneficiary of healthy construction demand given the group&rsquo 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,&rdquo write Tan and Lim.

 

They add: &ldquo 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.&rdquo

 

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. 

 

Pan-United Corporation has reported earnings for the FY2024 ended Dec 31, 2024 of $40.86 million, up 19% y-o-y. 

 

For the 2HFY2024, earnings came in 9% y-o-y higher at $22.3 million.

 

Earnings per share for FY2024 was 5.85 cents per share, 19% y-o-y higher than the 4.93 cents per share declared previously. 

 

Pan-United recorded a 5% y-o-y revenue growth for FY2024 of $812.3 million, and a 3% y-o-y growth in 2HFY2024 revenue of $427.6 million.

 

The group says that revenue growth was backed by a healthy construction industry in Singapore. The increase in business activities resulted in higher raw material, subcontract costs and other direct costs and other expenses in FY2024. 

 

The group has declared an interim dividend of 0.7 cents per ordinary share, and a final dividend of 2.3 cents per ordinary share. 

CGS International (CGSI) analyst Kenneth Tan has maintained his &ldquo add&rdquo call on Pan-United Corporation at a raised target price (TP) of 75 cents from 72 cents previously in anticipation of the company benefiting from an industry upcycle in FY2025.

 

&ldquo The latest statistics from the Building and Construction Authority (BCA) support our view that Singapore construction activities remain on an upcycle. Based on January to November 2024 figures, we believe full-year construction output and contract awards exceeded the upper end of BCA&rsquo s guidance by around 3% and around 13%, respectively,&rdquo writes Tan in his Jan 13 note.

 

He adds: &ldquo Similarly, we think full-year industry ready-mix concrete (RMC) demand outpaced BCA&rsquo s guidance by around 3%, given that January to November 2024 demand was up by a robust 10% y-o-y.&rdquo

 

Industry strength remains primarily driven by the public sector, with large infrastructure projects including Changi Airport Terminal 5 and the Cross Island Line, while public built-to-order (BTO) housing projects under construction are set to ramp up to 150 concurrent projects by end-2025.

 

With this, Tan sees Pan-United as well-positioned to capture healthy construction demand in the coming years given its large exposure to the public infrastructure and residential sectors. 

 

&ldquo We expect FY2025 to F2026 earnings before interest taxes depreciation amortisation (ebitda) margin to remain high at around 9%, backed by operating leverage from improving industry volumes, favourable project mix as infrastructure projects tend to use a higher proportion of higher-margin specialised concrete, and elevated RMC average selling price (ASPs).&rdquo

 

If margins surprise on the upside, Tan calculates his FY2025 to FY2026 earnings per share (EPS) estimates to rise by around 3% for every 20 basis point (bps) increase in ebitda margin. 

 

He continues: &ldquo For the upcoming FY2024 results, we expect Pan-United to report profit after tax and minority interests (patmi) of $40 million, with a higher full-year dividend per share (DPS) of 2.9 cents.&rdquo

 

With the company&rsquo s end-FY2024 net cash remaining strong at around 20% of its current market cap, Tan notes that the stock&rsquo s current valuation of 2026 earnings to enterprise value (EV)/ ebitda of 3.6 times is undemanding, and sees that there is space for the discount to narrow further as Pan-united benefits from industry and environmental, social and governance (ESG) tailwinds.

 

Re-rating catalysts noted by the analyst include strong industry volume growth and sustained margin strength.

 

Conversely, downside risks include counterparty credit risks as well as an economic slowdown triggering weak construction demand and negatively impacting RMC sales volumes.

Revenue in H1 has risen 7 per cent to S$384.7 million, 7 per cent higher than the S$360.2 million figure in the year before

 

PAN-UNITED Corporation : P52 -2.83% posted a net profit of S$18.6 million in the first half of the year, 34 per cent more than S$13.9 million in the corresponding year-ago period.

 

Revenue in H1 rose 7 per cent to S$384.7 million, 7 per cent higher than the S$360.2 million figure in the year before.

 

The increase in revenue was supported by a robust construction industry in Singapore, said Pan-United &ndash which specialises in low-carbon concrete technologies &ndash in a bourse filing on Tuesday (Jul 30). 

 

New HDB developments and the upcoming Cross Island Line as well as the Tuas Port project are expected to contribute to public sector construction demand, said the group. The private sector will continue to be supported by residential developments, development of mixed-use properties and industrial facilities.

 

In Malaysia, the construction industry is maintaining its positive outlook especially in Johor with demand stemming from data centres, semiconductor factories and industrial parks. 

 

However, with the reduction in diesel subsidies and the imposition of sales tax, the cost of doing business is likely to increase, Pan-United noted.

 

Earnings per share for H1 stood at 2.66 Singapore cents, up 23 per cent from 2.17 Singapore cents previously. 

 

An interim dividend of S$0.007 per share was proposed, down from S$0.005 in the previous year. 

Chief operating officer Ken Loh Kah Soon has replaced May Ng as the company&rsquo s CEO

READY-MIX concrete producer Pan-United Corporation announced several changes to its board effective from Monday (Jul 15), with current chief executive officer May Ng stepping down after 13 years at the helm.

 

Ken Loh Kah Soon has succeeded Ng as CEO, and has since relinquished his position as chief operating officer. He will be responsible for implementing the group&rsquo s overall strategies as well as the management and growth of the group, Pan-United said in a bourse filing.

 

Loh has also been appointed as a member of the executive committee. He first joined Pan-United as general manager in 1999 and holds 2.8 million shares in the company.

 

Said Ng of Loh&rsquo s appointment: &ldquo We are very pleased to announce Ken&rsquo s appointment as CEO of the company. Ken has been instrumental in our transformation from a brick-and-mortar concrete company to a global leader in low-carbon concrete technologies.&rdquo

 

Meanwhile, Ng has been appointed executive chairman of Pan-United&rsquo s board. She succeeds Tay Siew Choon, who retired after serving as a director of the company for close to 20 years.

 

Other changes to Pan-United&rsquo s board include the appointment of practising lawyer Chan Wan Hong as independent director, a member of its audit committee, as well as a member of its remuneration committee.

 

A senior director at FC Legal Asia, Chan has extensive experience in capital market transactions and advises Singapore Exchange-listed companies on their corporate actions and compliance requirements. He is also an independent non-executive director of Centurion Corporation and an independent non-executive director of Multi-Chem.

 

The company has also re-designated Fong Yue Kwong from independent director to lead independent director of the company, on top of being appointed as an audit committee member. He has more than 40 years of experience in the port, marine supply base and logistics industries in Singapore and Asia.

 

Lastly, the company has appointed Soh Ee Beng as chairman of the nominating committee.

 

UOB Kay Hian (UOBKH) analysts Llelleythan Tan and Heidi Mo have initiated a &ldquo buy&rdquo call on Pan-United Corporation as they see the company being a market leader with concrete growth prospects.

 

&ldquo With an around 40% domestic market share, Pan-United Corporation is a market leader in cement and concrete supply providing a diverse range of concrete types, and boasts an industry-leading position in low-carbon concrete technologies,&rdquo note Tan and Mo in their June 19 report.

 

The company generates its revenue mainly from its concrete and cement segment where it supplies cement, ready-mix concrete (RMC) and other aggregates, which form 98% of its overall topline.

 

In addition, Pan-United also provides digital solutions for construction companies, which earns it higher-quality recurring revenue.

 

With the increasing number of public and private infrastructure projects, Tan and Mo see Pan-United as a &ldquo strong proxy&rdquo to Singapore&rsquo s growing construction demand.

 

&ldquo With many major construction projects such as Changi Airport Terminal 5, Tuas Port and the expansion of Sentosa and Marina Bay Sands Integrated Resorts on the horizon, we expect revenue to grow strongly at a three-year compound annual growth rate (CAGR) of 9.2% for FY2024 &ndash FY2026,&rdquo they write.

 

&ldquo In addition, Singapore&rsquo s transition towards net-zero emissions by 2050 is expected to increase demand for Pan-United&rsquo s products, particularly its proprietary low-carbon PanU CarbonCure Concrete for the construction sector,&rdquo they add. &ldquo Backed by these favourable tailwinds, Pan-United&rsquo s FY2024 &ndash FY2026 net profit is expected to grow at a three-year CAGR of 21.6% y-o-y.&rdquo

 

Strong net cash position

 

With its strong net cash position, the analysts also expect Pan-United to distribute higher dividends and conduct more share buybacks given its three-year net profit CAGR of 21.6%.

 

&ldquo Pan-United has been consistently paying out dividends for the past five years at a 45% - 60% dividend payout ratio for FY2019 &ndash FY2023 (excluding FY2020), above its formal dividend policy of not less than one third of its annual patmi. We expect dividends to increase to 2.8 - 4.0 cents [per] share, implying a dividend payout ratio of around 44% and dividend yields of 6% - 9%,&rdquo the analysts say.

 

Tan and Mo have given Pan-United a target price of 71 cents, which is pegged to 11 times its FY2024 P/E.

 

&ldquo We think Pan-United is undervalued at its current attractive valuation of 8.0 times FY2024 P/E, a 46% discount to its peers. We believe Pan-United deserves a re-rating, given its commanding domestic market share, favourable tailwinds and industry leadership in low-carbon concrete, backed by expected earnings growth for FY2024 &ndash FY2026,&rdquo they add.

READY-MIX concrete producer Pan-United Corporation is pivoting to be a solutions provider as it embarks on its plans to transform its business model.

 

As part of this shift towards an asset-light strategy, the company is looking to sell its intellectual property (IP) in sustainable concrete, said chief executive officer May Ng in an interview with The Business Times.

 

Besides selling its IP, it is looking to offer other capabilities developed in-house as services to other ready-mix concrete (RMC) companies globally.

 

This includes technological solutions through its subsidiary AiR digital, product licensing as well as technical management.

 

&ldquo Our vision is to share our IP, know-how, learning with other like-minded RMC companies in the world. And when we share our learning with them, we learn from them. We benefit when we learn from them, they will benefit. And if they are prepared to adopt our learning, they can help to decarbonise in their countries of operations. So this is the way we want to expand our impact,&rdquo said Ng.

 

&ldquo When these RMC companies use our solutions for sustainability, we can expand the positive impact of our decarbonisation efforts beyond our geographical footprint. This network of like-minded RMC companies can generate or stimulate more ideas to accelerate decarbonisation,&rdquo she added.

 

The pivot to becoming a solutions provider is supported by two other strategies: First, to focus on product innovation through research and development to expand its low-carbon product range and second, to emphasise digital innovation by incorporating artificial intelligence, mobility, cloud computing and data analytics to add value to its supply chain processes. 

 

Currently, Pan-United has over 300 specialised concrete solutions in its portfolio, with over half of them green certified.

 

The company has positioned itself as a leader in low-carbon concrete solutions, and has committed to sell only low-carbon concrete by 2030.

 

Ng told BT that the company is on track to meet this target, with more than 50 per cent of its volume now sold being low-carbon concrete.

 

Currently, there are two main methods in which the company is producing low-carbon concrete. One is by substituting the most common type of cement &ndash which is one of the key materials of concrete &ndash with alternative materials that are less carbon-intensive. This includes using waste concrete.

 

The production of cement typically releases a large amount of carbon dioxide, and is therefore very carbon-intensive.

 

Another method is by injecting carbon dioxide into the concrete mix &ndash a process known as carbon mineralisation.

 

Low-carbon concrete reduces emissions by 58 per cent on average, compared with traditional concrete, noted Ng.

 

Given that 70 per cent of the embodied carbon of a building&rsquo s emissions &ndash which refers to the amount of emissions released from the materials and construction process before it becomes operational &ndash using low-carbon concrete could reduce its embodied carbon by over 20 per cent, she added.

 

However, the use of low-carbon concrete is more costly for the company. For example, for its carbon mineralisation solution, Pan-United has to pay for the carbon dioxide produced from industrial manufacturers on Jurong Island.

 

Ng noted that developers are currently still not prepared to pay more for low-carbon concrete, and Pan-United has to shoulder the cost increase for now.

 

&ldquo While we would like to pass on the higher costs, unfortunately, the market is still not ready for it... The only way forward is to try to get economies of scale so that the cost and investment can be mitigated,&rdquo said Ng.

 

When asked if Pan-United would be looking at generating carbon credits from the carbon savings generated from the use of low-carbon concrete, Ng said that the company would like to eventually be able to get extra revenue through the sale of carbon credits but there are limited specialists and consultants at the moment that could support it in assessing the credibility of such a project.

 

Still, the company has taken a first step by providing environmental product certificates on its low-carbon concrete. These are disclosure reports that document the materials and environmental impact of the product based on a life cycle assessment, and have been verified by third parties.

 

&ldquo We take it one step by one step... Because you need to verify it, you need to make sure that all these are certified. And then after that, can we move to the next step? Definitely, we hope to, and we want to... It&rsquo s a little bit of a long process. But I think this is a trend, because this is the way that will help people to invest more to decarbonise,&rdquo she said.

 

Despite the higher costs of using low-carbon concrete, Pan-United posted a net profit of S$20.4 million for the second half of its 2023 financial year ended Dec 31, up 107 per cent from S$9.9 million the previous year.

 

Revenue for the period increased 13 per cent to S$414 million from S$365.9 million a year ago.

 

This brings the group&rsquo s profit for the full financial year to S$36.3 million, up 56 per cent from S$23.4 million the year before, while its revenue went up 10 per cent to S$774.1 million from S$703.3 million.

 

The higher revenue recorded in FY2023 was primarily driven by its concrete and cement business, said the group in its latest earnings results.

 

Nonetheless, Ng was more cautious about the construction sector&rsquo s performance for 2024, noting that the Building and Construction Authority is expecting demand for RMC to be between 12 million and 13 million cubic metres, which is relatively similar to 2023&rsquo s activity level of 12.3 million cubic metres. 

MAINBOARD-LISTED Keppel and Pan-United Corporation on Thursday (Jan 11) inked a memorandum of understanding (MOU) with industry leaders to jointly develop and commercialise low-carbon technologies.

 

The industry leaders are Chevron Singapore, Surbana Jurong, Air Liquide Singapore, Osaka Gas Singapore and Pavilion Energy. Together with Keppel and Pan-United, they make up the Low-Carbon Technology Industry Consortium (LCT-IC).

 

The group will accelerate the development of cost-effective carbon capture, utilisation and sequestration (CCUS), as well as the production, transportation, distribution and utilisation of lower-carbon hydrogen and its derivatives at scale, the parties said in a statement.

 

The aim is to commercialise new lower-carbon technology pathways in Singapore, they added, to help Singapore achieve its target of net-zero emissions by 2050.

 

The MOU is an extension of a previous one signed in July 2020, which also aimed to develop integrated and energy-efficient CCUS systems for Singapore.

 

Under the later MOU, LCT-IC members will seek to partner, exchange ideas, share technical insights and develop lower-carbon research, development and demonstration guided by a framework. Air Liquide Singapore, Osaka Gas Singapore, and Pavilion Energy are new members in the group.

First, the group will develop research and development (R& D) projects on lower-carbon energy technology solutions, together with institutes of higher learning and research institutes.

 

Second, it will partner technology scale-up platforms to move lab-scale research and technologies of lower-technology readiness levels to test beds.

 

Third, the consortium will establish scalable industrial solutions to advance lower-carbon value chains, including first-of-its kind, pre-commercialisation demonstration projects.

 

Frederick Chew, chief executive officer of the Agency for Science, Technology and Research (A*Star) and guest of honour at the MOU signing ceremony, said: &ldquo It is heartening to see the scope of this collaboration being broadened, as innovation through R& D will be crucial in tackling common problem statements and barriers to adoption.&rdquo

 

Peggy Mak of Phillip Securities has maintained her " buy" call on Pan-United Corp. However, given the relatively muted prospects for the rest of the year, she has lowered her target price to 50 cents from 54 cents.

 

In her July 5 note, Mak notes that the value of contracts awarded for the first four months of the year was down 13.5%.

 

At this rate, the total value of contracts this year might end at the lower range of official estimates of between $27 billion and $32 billion, which is below 2022' s $29.8 billion.

 

" Lower contract awards will translate into lower construction output and building materials consumption in the following 6 to 12 months," she explains.

 

She also notes that both demand for ready-mixed concrete and average selling prices have dipped.

 

However, with an expected ramp-up in private housing units - as indicated by the government land sales programme for 2H2023, which is 50% higher than 2022 - Mak sees an uplift in demand for building materials from the second half of 2024 onwards.

 

Nonetheless, she continues to like Pan-United for its fundamentals. " The business generates strong operating cash flow, underpinning a dividend yield of at least 4.5%."

 

Furthermore, Pan-United has been gaining traction with its CO2 mineralised concrete, as part of the broader sustainability drive, with use by projects such as PSA&rsquo s Tuas Port and Capitaland&rsquo s building construction at 3 Science Park Drive.

 

" Greater industry adoption of these products would set Pan-United apart from its competitors," says Mak.

 

Pan-United has reported earnings of $9.89 million for its 2HFY2022 ended December, down 16% compared to the previous corresponding period at $11.5 million.

 

For the full year, however, the company reports earnings of $23.4 million, 25% higher y-o-y. Excluding discontinued operations, earnings from continuing operations increased 42% y-o-y to $27.5 million in FY2022.

 

On Oct 14, Pan-United announced the proposed disposal of its entire 49% issued share capital in PT Pacific Granitama (PTPG), a limited liability company in the business of the mining, production, sale and export of aggregates and other materials in Indonesia. The transaction is currently in progress.

 

Revenue from Pan-United&rsquo s continuing operations in 2HFY2022 at $365 million is 18% higher y-o-y, while FY2022&rsquo s revenue grew 20% y-o-y to $703 million. This is primarily due to higher revenue from the company&rsquo s concrete and cement business.

 

The increase in revenue arose as a result of higher selling prices to cover higher costs of raw materials, subcontract costs and other direct costs during the year. An upswing in other expenses was also recorded on the back of higher energy costs.

 

Additionally, Pan-United&rsquo s staff costs increased 13% y-o-y in FY2022 due to ongoing manpower constraints and rising manpower costs in Singapore.

 

Other income fell by 39% y-o-y to $3.4 million in FY2022, in light of reduced government grants from the Singapore government&rsquo s Covid-19 support schemes.

 

For FY2022, Pan-United&rsquo s ebitda was $48.6 million. Excluding discontinued operations, the company&rsquo s ebitda from continuing operations stood at $51.5 million in FY2022, a 25% growth y-o-y.

 

In its outlook statement, the company cites Building and Construction Authority&rsquo s projection that total construction demand in Singapore will reach between $27 billion and $32 billion in 2023 compared to the preliminary total construction demand of $29.8 billion for 2022.

 

BCA estimates that the volume of ready-mix concrete will reach between 11.5 million cubic metre and 12.5 million cubic metres in 2023, compared to 11.6 million cubic metres in 2022.

 

&ldquo The industry is expected to continue facing challenges from higher operating costs such as energy and manpower costs,&rdquo the company notes.

 

Pan-United has reported earnings of $9.89 million for its 2HFY2022 ended December, down 16% compared to the previous corresponding period at $11.5 million.

 

For the full year, however, the company reports earnings of $23.4 million, 25% higher y-o-y. Excluding discontinued operations, earnings from continuing operations increased 42% y-o-y to $27.5 million in FY2022.

 

On Oct 14, Pan-United announced the proposed disposal of its entire 49% issued share capital in PT Pacific Granitama (PTPG), a limited liability company in the business of the mining, production, sale and export of aggregates and other materials in Indonesia. The transaction is currently in progress.

 

Revenue from Pan-United&rsquo s continuing operations in 2HFY2022 at $365 million is 18% higher y-o-y, while FY2022&rsquo s revenue grew 20% y-o-y to $703 million. This is primarily due to higher revenue from the company&rsquo s concrete and cement business.

 

The increase in revenue arose as a result of higher selling prices to cover higher costs of raw materials, subcontract costs and other direct costs during the year. An upswing in other expenses was also recorded on the back of higher energy costs.

 

Additionally, Pan-United&rsquo s staff costs increased 13% y-o-y in FY2022 due to ongoing manpower constraints and rising manpower costs in Singapore.

 

Other income fell by 39% y-o-y to $3.4 million in FY2022, in light of reduced government grants from the Singapore government&rsquo s Covid-19 support schemes.

 

For FY2022, Pan-United&rsquo s ebitda was $48.6 million. Excluding discontinued operations, the company&rsquo s ebitda from continuing operations stood at $51.5 million in FY2022, a 25% growth y-o-y.

 

In its outlook statement, the company cites Building and Construction Authority&rsquo s projection that total construction demand in Singapore will reach between $27 billion and $32 billion in 2023 compared to the preliminary total construction demand of $29.8 billion for 2022.

 

BCA estimates that the volume of ready-mix concrete will reach between 11.5 million cubic metre and 12.5 million cubic metres in 2023, compared to 11.6 million cubic metres in 2022.

 

&ldquo The industry is expected to continue facing challenges from higher operating costs such as energy and manpower costs,&rdquo the company notes.

 

In his report dated Dec 12, Chua is maintaining his &ldquo buy&rdquo call on Pan-United Corporation with an unchanged target price of 54 cents.

 

PhillipCapital analyst Terence Chua has lowered his earnings estimates for Pan-United Corporation for the FY2022 and FY2023 by 12% and 11% respectively on account of the Heightened Safety period imposed by the Ministry of Manpower (MOM) from Sept 1 to Feb 28, 2023.

 

The group&rsquo s FY ends in December.

 

To Chua, the measures by the MOM mean that local construction projects are progressing slower than expected in general. Year-to-date (ytd), the number of contracts awarded is down by 9.4% y-o-y. The number of contracts awarded slowed down in the 3QFY2022 as workplace fatalities hampered project progression rates, Chua notes.

 

Furthermore, the analyst says that the prospects of the local construction sector are expected to be weighed down by higher operating costs, particularly for skilled labour and energy.

 

&ldquo The operating climate is likely to be complicated and burdened by high financing cost and heightened credit risks on the back of an inflationary and rising interest rates environment,&rdquo he adds, even though he still sees the industry&rsquo s tailwinds as intact.

 

&ldquo Despite the near-term headwinds, we believe the construction recovery remains intact. HDB has announced that it will ramp up the supply of new build-to-order (BTO) flats over the next two years to meet the strong housing demand from Singaporeans,&rdquo Chua writes.

 

&ldquo It plans to launch up to 23,000 flats per year in 2022 and 2023, which represents a significant increase of 35% from the 17,000 flats launched in 2021. Changi Airport&rsquo s Terminal 5 project will resume after being put on hold for two years due to the Covid-19 pandemic,&rdquo he adds.

 

In addition, the Building and Construction Authority (BCA)&rsquo s forecasts of the average construction demand over 2022 to 2026 of $25 billion to $32 billion will support the demand for construction in the coming years, Chua points out.

 

&ldquo In the near term, projects in the pipeline that will likely support the group&rsquo s growth are the Singapore Science Centre&rsquo s relocation, the Toa Payoh integrated development, Alexandra Hospital redevelopment, Bedok&rsquo s new integrated hospital, Phases Two-Three of the Cross Island MRT Line and the Downtown Line&rsquo s extension to Sungei Kadut,&rdquo he says.

 

In his report dated Dec 12, Chua is maintaining his &ldquo buy&rdquo call on Pan-United Corporation with an unchanged target price of 54 cents.

 

&ldquo With an approximately 40% market share in the industry, we continue to see Pan-United as a key beneficiary of the construction sector recovery. Pan-United&rsquo s batching plants still have capacity to take on a 10%-15% increase in ready-mix concrete (RMC) demand in Singapore,&rdquo he says.