1H24 Financial Performance

• Revenue and Profit Growth: PUC reported robust financial results for 1H24, with revenue growing by 6.8% year-on-year (YoY) to S$384.7 million. The company’s core Profit After Tax and Minority Interest (PATMI) surged by 31.3% YoY to S$18.6 million, driven by higher construction demand and improved margins from its concrete and cement business.
• EBITDA: The company’s EBITDA increased by 17.9% YoY to S$37.1 million, reflecting better operational efficiency and a favorable project mix.
• Gross and Net Margins: Gross margin improved slightly to 22.0%, while the core PATMI margin rose to 4.8%, showcasing the company’s ability to maintain profitability amid rising operational costs.

Strategic Outlook and Growth Drivers

• Construction Boom: Singapore’s construction sector is experiencing significant growth, with the Building and Construction Authority (BCA) projecting total construction demand in 2024 to be between S$32 billion and S$38 billion. This boom is fueled by both public and private sector projects, including new Housing Development Board (HDB) developments and major infrastructure initiatives like the Cross Island MRT line and Tuas Port expansions.
• Sustainable Concrete Solutions: PUC is well-positioned to benefit from Singapore’s push towards sustainable construction. The company’s green products, such as PanU Green and PanU Carbon Mineralisation Concrete (CMC+), are gaining traction in the market. PUC is a global leader in CMC production, which significantly reduces CO2 emissions in concrete manufacturing. This aligns with Singapore’s goal of achieving net-zero emissions by 2050.
• Overseas Operations: The company also reports positive developments in its overseas markets, particularly in Malaysia and Vietnam. In Malaysia, the demand for construction materials is driven by data centers, semiconductor factories, and industrial parks, especially in Johor. In Vietnam, the real estate market is showing signs of recovery, contributing to a 9.4% YoY increase in geographical revenue from these regions.

Dividend and Shareholder Returns

• Higher Dividend: PUC declared an interim dividend of 0.7 Singapore cents per share for 1H24, up from 0.5 Singapore cents per share in 1H23. The total dividend for 2024 is expected to reach 2.8 Singapore cents per share, offering an attractive annualized dividend yield of around 5.5%.

Valuation and Recommendation

• Buy Rating Maintained: The report maintains a “Buy” rating on PUC with a target price of S$0.71, implying a potential upside of 39.2% from its current share price of S$0.51. The valuation is based on a 2024 forward price-to-earnings (PE) ratio of 11x, reflecting the company’s strong earnings outlook and attractive dividend yield.

Risks

• Operating Costs: The company faces risks related to rising operating costs, particularly due to tight labor conditions and energy price volatility, which could impact profit margins.

Conclusion

Pan-United Corporation is poised for continued growth, supported by Singapore’s booming construction sector and its leading position in sustainable concrete solutions. The company’s strong financial performance, coupled with its strategic focus on green products and international expansion, makes it an attractive investment with significant potential for shareholder returns.

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