Singapore construction boom seen to intensify in 2015

Grass will be greener for these firms.

According to DBS, construction activities will likely intensify  towards 2015.

Current pipeline projects contributing to construction activities in 2015 include Thomson Line, Downtown Line 2 & 3, Phase 4 of Pasir Panjang Terminal, LNG Terminal, Deep Tunnel Sewage System, M+S development projects at Ophir-Rochor and Marina One, Changi Airport development including Terminal 4.

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We believe Pan United (PAN SP, TP S$1.21) is a key beneficiary to the robust construction pipeline. Pan United has a good exposure to most of these projects and is less susceptible to cost pressures faced by other construction companies amongst our coverage universe.

Another company that we could potentially benefit from the master plan is Centurion Corp (CENT SP, TP S$0.77), which owns and operates foreign worker dormitories in Singapore.

The stream of development projects announced will ensure that the demand for foreign workers will still be strong in the medium term, notwithstanding productivity improvements that are ongoing in the construction sector.

Centurion is uniquely poised to benefit from the construction boom in the long term as the majority of its dormitories (c.19k of c.28k beds) are on land leases of thirty years or longer, in contrast to temporary dormitories whose leases run a maximum of nine years.

The Group's permanent dormitories are in Mandai, Toh Guan and Woodlands, all of which are located close to development projects identified in the Master Plan. We like Centurion for its growth profile - its total bed count is expected to rise from c34k today to 55k by 2015, in both Malaysia and Singapore.

We currently have a buy call on this stock, with a DCF-based target price of S$0.77.

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