One Way To Play The Next Building Boom

By the year 2030, the population of Singapore could reach 6.9 million. That could mean more houses may need to be built between now and then. It could also mean a better transport system may need to be constructed over the next 20 years.

So what’s in it for investors?

I suggest that one way may be to take a closer look at the pick & shovel companies.

For example, legend has it that the folks who made money during the Californian Gold Rush in the mid-19th century were not the gold prospectors or miners, although some did. Instead it was the suppliers of the picks and shovels who were raking it in. While the gold prospectors took the risk, the pick and shovel makers just took their money.

Here in Singapore, construction companies such as OKP Holdings (SGX:5CF) and Chip Eng Seng (SGX:C29) have an enviable record of winning major contracts from the Government. So, they could be in line to pick up more contracts when the Government fleshes out its infrastructure plans, although there are no guarantees.

However, there may be another way that investors could hitch a ride on the next building boom. Regardless of which companies win the building contracts they should all need concrete, which brings us to Pan-United Corporation (SGX:P52).

Pan-United derived over 80% of its revenues from its Basic Building Resource (BBR) business over the last 5 years. This division supplies high-quality cement as well as ready-mixed concrete (RMC). Its concrete has already been used in a variety of large infrastructure projects such as some MRT lines and Changi Airport.

So, instead of trying to second-guess the likely winners of the lucrative contracts for infrastructure projects, why not look around at the less glamorous pick & shovel companies. Because whatever happens, they should all need picks and shovels.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.