SINGAPORE (7 Nov): NRA Capital is maintaining its “overweight” call on Pan-United with a fair value of 70 cents, citing its 3Q16 results exceeded expectations.

(See also: Pan-United posts 21% rise in 3Q earnings to $7.3 mil)

Analyst Liu Jinshu notes in a Friday report that earnings were boosted by a one-off exchange gain of $3.1 million despite revenue dropping 16% to $175 million. Without the one-off foreign exchange gain, earnings still came in at $4.15 million, higher than the $2.53 million in 4Q15 or $1.73 million in 1Q16.

“The margin gains came about as a result of higher productivity and cost sharing with suppliers,” says Liu, adding that direct costs remaining unchanged at $42.7 million.

Furthermore, Pan-United’s tug and barge (T&B) losses are set to cease in 4Q, as any losses incurred before the completion will be offset by disposal gains. The T&B business lost $1.3 million in 3Q16 following losses of $4.1 million in 1H16. Without these losses, earnings came in at $5.45 million in 3Q16, excluding one-off forex gains. Liu is forecasting earnings of $5 million, factoring in higher staff costs or slower business at the year-end.

(See also: Pan-United to sell tug and barge business to founding family for $29.9 mil)

Liu is raising FY16 forecasts, with revenue expected at $709.5 million and full-year earnings at $19.6 million, up from $14.6 million. FY17 is also expected to see improvement with earnings booked at $26.2 million.

“The cementitious material plant in Malaysia is pending certification of completion and will likely be operation by 2Q17,” says Liu, “we expect this plant to also aid towards margin improvement.”

Pan-United is also looking overseas for growth, with the company clarifying that the plant in Malaysia may also supply to customers in Malaysia, where margins are higher. Potential further investment in Vietnam is also possible, with the company already holding a 55% stake in a joint venture for $5 million, especially when the joint venture has turned profitable.

“Within Singapore, the company remarked that selling prices may continue to remain low or drop and that conditions may improve only later in 2H17,” says Liu.

Shares of Pan-United are trading 1 cent higher at 62 cents.