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.
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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’s Tuas Port and Capitaland’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 shares changed hands at 40 cents as at 2.41pm, down 1.25% for the day.
