CGS International
July 4, 2025

Singapore Building Materials Sector Set for Robust Growth: Top Picks, Earnings Outlook, and ESG Trends for 2025-2027

Sector Overview: Construction Boom to Drive Ready-Mix Concrete Demand

Singapore’s construction and building materials sector is poised for substantial growth from 2026 onwards, underpinned by a strong project pipeline and elevated construction activities. CGS International maintains an Overweight view on the sector, citing rising contract awards, robust ready-mix concrete (RMC) demand, and significant infrastructure investments.

• Sector Overweight reiterated due to elevated construction activity
• RMC demand projected to jump 34% from 2024’s 13.4 million m³ to 18 million m³ by 2027
• EPS for leading concrete players (Pan-United Corp Ltd and Hong Leong Asia) forecast to grow 6–22% in FY26–27
• Key re-rating catalysts include stronger offtake volumes and potential M&A activity

Construction and Materials Market: Key Demand Drivers and Forecasts

• 5M25 construction output reached S\$16.4 billion, up 9% year-on-year, tracking at 42% of the lower end of the Building and Construction Authority’s (BCA) 2025 forecast
• Contract awards in the first five months of 2025 totaled S\$17.7 billion, up 3% year-on-year, but still below BCA’s annual forecast range (S\$47–53 billion)
• Steel demand surged 49% year-on-year in the first four months of 2025, while RMC demand increased 1% (historically, RMC demand skews to the second half of the year)

Valuation Snapshot: Singapore Building Materials Peers

Pan-United Corp Ltd (PANU): Market Leader in Low-Carbon Concrete

Summary: Pan-United Corp Ltd, Singapore’s largest RMC player with about 40% market share in 2024, stands out for its strength in institutional and civil engineering projects and its leadership in sustainable concrete solutions.

• 1H25F revenue estimated at S\$396m (+3% yoy, -7% hoh), net profit S\$20m (+105% yoy, -13% hoh)
• FY25F–27F EPS raised by 2.9–8.0% on higher RMC volumes
• Key project wins expected in infrastructure and institutional segments, which now make up 52% of BCA’s 2025 demand forecast (up from 42% in 2024)
• Target price (TP) lifted to S\$0.96, pegged to FY26F EV/EBITDA of 6.2x
• Dividend yield projected to grow from 3.66% (2025F) to 4.80% (2027F)
• Balance sheet remains robust with net gearing expected to improve to -37.9% by 2027F
• Key risks: counterparty credit risks and slowdown in project offtake

Financial Highlights (S$ millions unless stated):

ESG Initiatives:

• First and only Singapore concrete firm with “Leader” certification from SGBC
• Offers 300+ types of low-carbon concrete; aims for 100% low-carbon concrete by 2030 and carbon-neutral company status by 2050
• Adopts CarbonCure technology; provides on-demand Environmental Product Declaration certificates

Hong Leong Asia (HLA): Benefiting from Singapore and Malaysia Infrastructure Boom

Summary: Hong Leong Asia, with operations across Singapore and Malaysia, is well-positioned to capitalize on the Singapore construction upcycle and rail infrastructure projects in Malaysia. Its 49%-owned China Yuchai International (CYD) is also set to benefit from growing China vehicle exports.

• 1H25F revenue estimated at S\$2,202m (-2% yoy, +10% hoh), PATMI S\$48m (-2% yoy, +28% hoh)
• FY26F–27F EPS raised by 2–4% on higher RMC industry volumes
• Revenue forecast: S\$4,599m (2025F), S\$4,928m (2026F), S\$5,185m (2027F)
• Net profit forecast: S\$95.9m (2025F), S\$116.9m (2026F), S\$129.7m (2027F)
• Dividend yield projected to rise from 2.8% (2025F) to 3.79% (2027F)
• TP raised to S\$1.95, with 21.9% upside from current price
• Balance sheet remains strong with net gearing improving to -20.8% by 2027F
• Key risks: slower China economic recovery, delays in Malaysia infrastructure projects

Financial Highlights (S$ millions unless stated):

ESG Initiatives:

• Targets 20% of engine sales from green products by 2025 (China Yuchai)
• Green concrete products in Singapore exceeded 10% of sales as of FY24, target to exceed 20% by 2025
• Reduced CO2 emission intensity by 28% versus 2016 levels, aiming for 50% reduction by 2025

BRC Asia Ltd: Strong Financials and High Dividend Yield

BRC Asia, another key Singapore building materials player, is rated Add with a target price of S$3.40. The company boasts strong recurring ROE (16.8% in CY25F), attractive dividend yields (6.4%), and resilient earnings growth, making it a solid peer in the sector.

Industry and ESG Trends: Sustainability and Safety Take Center Stage

Singapore’s regulatory push for sustainability and workplace safety is reshaping the sector:

• Workplace Safety and Health (WSH) criteria now required in all public sector project tenders above S\$1m
• Safety Disqualification Framework in place for poor WSH performers
• Jurong Port’s Integrated Construction Park and the new RMC Ecosystem to reduce emissions by 23,500 tons of CO2 annually through logistics and process automation
• Minimum 5% of tender evaluation weighted to safety (15% for BCA’s PQM framework quality component)
• Increased R&D in automation and logistics, including façade drones and autonomous loaders, to reduce safety risks and foreign labor reliance

Regional Peer Comparison: Singapore Leads in Profitability and Sustainability

Singapore’s cement and concrete players are outperforming regional peers in terms of ROE and dividend yield, while maintaining competitive P/E multiples.

• Singapore peers average ROE: 13.8% (vs. Malaysia 16.9%, Indonesia 5.3%, Thailand 7.1%)
• Singapore peers dividend yield: 4.3% (vs. Malaysia 2.4%, Indonesia 3.1%, Thailand 5.0%)
• P/E multiples are attractive versus regional averages, with Singapore at 12.1x (CY25F) and 10.4x (CY26F)

Conclusion: Sector Ready for Next Leg of Growth

With Singapore’s construction sector set to accelerate from 2026 onwards, ready-mix concrete demand is on track for record highs. Pan-United Corp Ltd and Hong Leong Asia remain top picks, offering strong growth, robust balance sheets, and leadership in sustainability. Investors should watch for industry volume growth, M&A opportunities, and policy-driven ESG trends as potential catalysts for sector re-rating.

Key Risks to Monitor

• Project delays due to construction bottlenecks or work stoppages
• Slower recovery in China affecting CYD (for HLA)
• Credit and offtake risks in a rapidly expanding market

Stock Rating Definitions

• Add: Total expected return exceeds 10% over 12 months
• Hold: Total expected return between 0% and 10%
• Reduce: Total expected return below 0%
• Overweight (sector): Positive aggregate recommendation on a market cap-weighted basis