Overview of the Building Materials Sector in Singapore

The Singapore construction sector is riding a strong upcycle, with robust public infrastructure investments and accelerating demand for ready-mix concrete (RMC). Key players like Pan-United Corp Ltd, BRC Asia Ltd, and Hong Leong Asia are well-positioned to benefit from these tailwinds. This report dives into their financial performance, growth prospects, and ESG efforts to provide comprehensive investment insights.

Pan-United Corp Ltd: Concrete Foundation for Growth

Current Price: S\$0.56 | Target Price: S\$0.75 | Recommendation: Add

Pan-United Corp Ltd (PanU) is a leading supplier of ready-mix concrete (RMC) in Singapore and is set to benefit from a booming construction sector. The company’s strong exposure to public infrastructure and housing projects, coupled with its ESG leadership, positions it as a key beneficiary of industry growth.

Financial Performance

For FY24, PanU is expected to report a net profit after tax and minority interests (PATMI) of S\$40 million, a 14% year-on-year growth. The company’s revenue for FY24 is projected to be S\$833.6 million, up from S\$774.1 million in FY23. Operating EBITDA margins are expected to remain robust at 9%, significantly higher than the 5-year historical average of 7.4%. This is attributed to operating leverage, favorable project mix, and elevated RMC average selling prices (ASPs).

By FY26, the company’s net profit is estimated to reach S\$44.6 million, with a recurring net profit of the same amount. PanU’s dividend yield is expected to grow from 5.18% in FY24 to 5.71% in FY26.

Market Position

PanU holds a competitive advantage in the public sector, with ongoing projects like Changi Airport Terminal 5 and the Cross Island Line. The number of built-to-order (BTO) public housing projects is set to increase to 150 concurrent projects by the end of 2025, up from 100 as of November 2024.

Valuation

PanU is trading at an undemanding CY26F EV/EBITDA of 3.6x, a 30% discount to its peers. With its target price set at S\$0.75, the stock offers an upside of 33.9% from the current trading price of S\$0.56.

ESG Leadership

PanU has established itself as a leader in sustainable construction materials. It aims to offer only low-carbon concrete by 2030 and carbon-neutral concrete by 2040. The company’s adoption of CarbonCure technology in 2018 has enhanced its portfolio of greener concrete products, such as PanU CarbonCure and PanU Green Concrete. Recognized with the “Leader” certification from the Singapore Green Building Council, PanU’s ESG efforts are likely to attract further investor interest.

BRC Asia Ltd: Reinforcing the Foundations

Current Price: S\$2.58 | Target Price: S\$2.70 | Recommendation: Add

BRC Asia Ltd specializes in the prefabrication of steel reinforcement solutions, serving as a critical player in Singapore’s construction industry.

Financial Performance

BRC’s revenue growth has been steady, supported by robust demand in the public sector. For FY25, the company is trading at a forward P/E of 8.9x, and this is expected to slightly improve to 8.8x by FY26. BRC’s dividend yield stands at an impressive 8.1%, reflecting its commitment to returning value to shareholders.

Market Position

BRC Asia benefits from its strong ties to Singapore’s public infrastructure projects. The company’s focus on automation and technology-driven solutions has enhanced its operational efficiency, making it a preferred supplier in the market.

Valuation

With a target price of S\$2.70, BRC offers a modest upside from its current trading price of S\$2.58. The company’s consistent earnings and high dividend yield make it an attractive investment in the building materials sector.

Hong Leong Asia: Leveraging Diversified Strengths

Current Price: S\$0.91 | Target Price: S\$1.20 | Recommendation: Add

Hong Leong Asia operates across multiple segments, including building materials, diesel engines, and consumer products. Its diversified portfolio positions it uniquely in the market.

Financial Performance

Hong Leong Asia is trading at a forward P/E of 7.9x for FY25, improving to 7.6x by FY26. The company’s dividend yield is projected at 3.2%, indicating a stable return for investors. Its recurring ROE is expected to reach 8.5% by FY26, showcasing strong operational efficiency.

Market Position

The company’s building materials division remains a core revenue driver, supported by public infrastructure projects. Additionally, its diesel engine business has seen steady demand, particularly in overseas markets.

Valuation

With a target price of S\$1.20, Hong Leong Asia offers a significant upside from its current trading price of S\$0.91. Its diversified operations and stable financials make it a resilient investment choice.

Conclusion

The Singapore building materials sector is poised for sustained growth, driven by robust public infrastructure investments. Pan-United Corp Ltd, BRC Asia Ltd, and Hong Leong Asia are well-positioned to capitalize on these trends. PanU stands out with its strong ESG initiatives and leadership in sustainable concrete solutions, while BRC Asia and Hong Leong Asia offer stable dividend yields and consistent earnings. Investors seeking exposure to this sector may find these stocks compelling, with significant upside potential.