(Update 30/4/17: Added on the fundamental information. Pan-United have 2 consecutive quarters of year on year EPS growth) It has been a lo...

Weekly Superstock Scan 24 Apr - 28 Apr 2017: Pan-United Corporation Ltd (Singapore)

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(Update 30/4/17: Added on the fundamental information. Pan-United have 2 consecutive quarters of year on year EPS growth)

It has been a long time since I posted on a potential superstock. I was overseas for 3 weekends starting end March, and there was no superstock found in my scans last week.

Talking about scans, this week's scan was rather problematic.

Since March, Firefox stopped supporting Silverlight, and I was unable to view the charts on freestockcharts.com anymore. I switched to using tradingview for the charts.

This week, Google Finance screen stopped working. The list of companies that passed the screen criteria failed to show up. This was a way bigger problem as there is very few free screener that works the same way as Google Finance. After spending some time searching, the best alternative that I found was MSN Money. It does not have the 150 moving average criteria, so I have to screen among a larger list of stocks.

To make things worse, my ShareInvestor account expired. ShareInvestor is the account that I use to look at the fundamentals of Singapore stocks. I can only renew my account tomorrow, so for this week I have to look at the fundamentals of Singapore stocks manually, i.e. looking at their quarterly reports to see if the earnings are growing year on year.

Enough of my rants and back to the superstock. This week, the potential superstock I found is a Singapore company - Pan-United Corporation Ltd (SGX:P52) . Pan-United Corporation Ltd is an Asian multinational corporation. It operates in 2 segments:


  • Concrete & Cement: Pan-United is Singapore’s largest supplier of ready mixed concrete (RMC) and cement, and one of the top two RMC suppliers in Asia Ex-China, with a growing footprint in Indonesia, Malaysia and Vietnam. In 2016, this segment contributes to 82% of Pan-United's revenue and 37% of profit after tax and non-controlling interests.




  • Ports: Pan-United is a  leading port owner and operator in China. Xinghua Port Group in China has built up strong trust in providing vital integrated logistics hub services from its ports in Changshu City. In 2016, this segment contributes to 13% of Pan-United's revenue and 63% of profit after tax and non-controlling interests.

Technical


From May 2016 to March 2017, Pan-United has been trading in a tight range from $0.56 to $0.66. In the first week of April, the price started to creep above the range to trade near $0.70, with an increasing volume. Last week, price broke strongly above $0.70 to close at $0.77. This is accompanied by a large volume of 5.7 times its weekly average volume.

The strong breakout is also significant as it broke above the 52 week high of $0.725. I am unsure of the reason for the breakout as there was no announcements by the company recently.

Fundamental


The earnings is trending up in the recent quarters but I am unable to see the longer term trend till I renew my ShareInvestor account. I will update the post once data is available.


According to my ShareInvestor data, Pan-United reported a loss in 4Q 2016. However, it is due to data error on their side as the earnings per share reported is a positive 0.8 cents. Subsequently, the TTM EPS should be 3.4 cents. 

Using corrected data, Pan-United had two consecutive quarters of year on year EPS growth.

Disposal of Shipping Business

In December 2016, Pan-United completed the divestment of its Tug and Barge Business for S$29.2 million of cash. The shipping industry has been faced with numerous headwinds in recent years, resulting in a severe erosion of freight rates. The Tug and Barge Business has been incurring losses since 2013, and most recently recorded an aggregate net loss of S$4.1 million for the half-year ended 30 June 2016.

This is positive for Pan-United as the sale will raise Pan-United's profitability going forward. The extra cash from the sale can also be used to repay loans or invest in new businesses, further increasing Pan-United's profitability.

Commence Operation of Malaysia Slag Grinding Plant

Pan-United will commence operation of its new Slag Grinding Plant in Johor, Malaysia. Slag is a raw material used in its ready mixed concrete (RMC) business. It is a backward integration move that will mostly help Pan-United enhance its margin as it is currently buying the same material elsewhere.

The new plant will also help Pan-United expand its cement and concrete business in the Southeast Asia region.

Steady Pipeline of Public Sector Projects

There are many major construction projects initiated by the public sectors. These include development works for Changi Airport Terminal 5, the LTA Thomson-East Coast MRT Line and Jewel Changi Airport. Some mega-projects the Group has secured for 2017, include the LTA Thomson Eastern Line, the LTA Downtown Line 3, Outram Community Hospital and Changi General Hospital Medical Centre.

Matrices
- Following the surge in price, Pan-United is trading at an expensive price-earning ratio of 17.9
- Relatively large float of 400 million shares, approximately 3300 times its average daily trading volume.

Risk Factors/ Things I do not like

  • Lower Ready Mixed Concrete Price - Pan-United has been facing pressure in their Cement and Concrete business due to stiff competition and falling ready mixed concrete price. If the price continues to drop, the savings from the Malaysian plant may be completely offset.
  • High Debt: Even with the injection of cash from the sale of Pan-United Shipping, Pan-United still have a net gearing of 0.7x and borrowings of S$300 million. This puts Pan-United at a vulnerable position to increase in interest rates.








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