This Week’s “Falling Knife”: Pan-United Corporation

PanUnitedLogoWhat can be more humdrum than making cement? Probably not a lot unless you consider watching paint dry as an activity. Nevertheless, it has certainly been an eventful week for cement maker Pan-United Corporation (SGX: P52) as its shares tumbled 8% to S$0.90 to step into the beam of this week’s “falling knife” spotlight.

Pan-United is what you would describe as a plodder. It began as a chandler in1958 providing equipment for small boats. Three decades later, it had gone from servicing ships to shipping services, which it still does. That said, shipping accounts for small part of the company’s overall business activities now.

Today, Pan-United only generates around 10% of its turnover from shipping. The main bulk, around 80% of its sales, comes from basic building resources that include cement, granite and ready mix concrete. The remaining 10% of its turnover comes from providing port services in China. But more about that later.

Pan-United describes its financial track record as being “consistent”, and indeed it is. Between 2008 and 20012, turnover increased by about a third, while profits jumped 44%. Over the same period, dividends have risen from $0.03 per share to $0.04 per share. Interestingly, the company had a cash balance of S$98m, which when subtracted from its debts of S$72m left it with net cash of S$26m.

On most measures Pan-United looks a solid performer. However, its association with China, through its ownership of Changshu Xinghua Port at the gateway of the Yangtze River Delta, has brought it into the gun-sights of the China bears. That unfortunately is one of the crosses that Pan-United will have to shoulder until the bears go back into hibernation.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.