Pan-United Annual Report 2016

Introduction - Business 

A. Cement and Concrete

Pan-United is an Asian multinational corporation focused on concrete & cement and ports. PanU is Singapore’s largest supplier of ready mixed concrete (RMC) and cement, with over 40% share of both markets. These businesses are vertically integrated with aggregate quarrying and logistics services to maximise on the value chain. PanU is also one of the top two RMC suppliers in Asia, with a growing footprint in Indonesia, Malaysia and Vietnam.

1. Ready Mixed Concrete
As Singapore’s biggest concrete supplier to the public and private sectors, PanU has the economies of scale and efficiency in supplying the widest range of specialised concrete products from the smallest to mega size projects. The concrete is batched in a network of plants located across the whole island to provide to customers.

In Singapore, PanU has supplied an array of concrete solutions for large-scale developmental and infrastructural projects commissioned by government agencies such as the Housing and Development Board, Land Transport Authority, Public Utilities Board, Ministry of Defence, Ministry of Environment, Civil Aviation Authority of Singapore, Ministry of Education, Jurong Town Corporation and Maritime and Port Authority. => Strong track record

PanU has strong partnerships with local and international construction companies, geo-technic specialists, pre-casters, distributors and other industry specialists. => Strategic network of suppliers and partners

2. Cement

PanU is Singapore’s largest supplier of quality cement. PanU is the industry leadership stems from two key strengths - long-term partnerships with leading cement manufacturers in Asia, and highly efficient operations from own cement terminal at Jurong Port. => Industry Leadership and has already pumped in CAPEX to build all necessary infrastructure

Customers are assured of consistent cement supplies stored at custom-designed terminals, which are the largest in Singapore. These terminals have dual-cell silos and a total storage capacity of 115,000 tonnes, with an annual throughput capacity of 3.0 million tonnes.

PanU will become a supplier of ground granulated blast furnace slag – a recycled cementitious material – when its new plant in Malaysia is completed in 2017.

3. Supply
Granite aggregates are shipped from own quarry in Indonesia. P.T. Pacific Granitama which operates one of the largest granite quarries operations in Karimun, with a capacity of 350,000 tonnes a month.

4. Innovation

PanU set up state-of-the-art Innovation Centre in 2012 to continue with R&D in creating a broad range of highly specialised concrete solutions for customers. 

B. Port

Xinghua Port Group in China has built up strong trust in providing vital integrated logistics hub services from its ports in Changshu City. Counted among China’s Top Ten river ports, they serve as the hub for import cargoes such as pulp and logs for robust domestic markets, and exports of high-value finished steel products and equipment. The ports’ strategic location on the Yangtze River Delta is a key competitive edge, both as an international port and as a cargo transshipment gateway for eastern and central China.

Xinghua Port Group has a proven track record in managing two of China’s fastest growing ports. Despite the slowing Chinese economy, it has grown in strength. In 2010, the Group handled 7.7 million tonnes of cargo. Within five years, cargo volumes have swelled nearly 70% to 13.0 million tonnes in 2015.

Helmed by an experienced and dynamic management team, the Group operates two adjacent ports - Changshu Xinghua Port Co Ltd (CXP) and Changshu Changjiang International Port Co Ltd (CCIP).

PanU ports are the main distribution hub for the Central and Eastern regions, which comprise the Yangtze River Delta. The Delta hinterland accounts for more than 30% or over one-third of China’s total foreign trade. It also makes up about one-fifth of China’s GDP.

Financials 

Revenue has an upward trend but stagnates around 700. 

Free Cash is inconsistent, for last 2 years the FCF has been negative and FY 2016 has seen positive Free Cash Flow.

ROE does not meet the requirement.

Net Debt to Equity Ratio are high for the last 3 years and there was not any signs of reduction. My concern with increasing interest rate environment and inconsistent cashflow, will the company become harder to compete in new market environment?

Price

After the FY results were announced in February 2017, there was price movement and it is $0.69 as of 2/4/2017. 

Conclusion
I need to understand the future direction of the company. How is the company intend to grow their markets in Malaysia, Vietnam and Indonesia? How will PanU get their financing? Which other projects in Singapore are they getting involved?

I have not got the time to digest past 5 years financial report and events such as divestment of their tugs and barges business back to the owner, special dividend issued in the past, etc. 

I also need to read up on the Chairman's letters to shareholders. Currently, on first look, I will archive this company. The business has its moat in Singapore but I am not familiar with regional countries' concrete industry. Hence, I will pass this.