Penguin International

[jh_sw]

Penguin performance in terms of profitability and share price continued to slide after share consolidation.
To be honest, I had thought of cutting losses when oil and gas industry tanked. And just about when I thought of
averaging down, the news that the company invested in Marco Polo Marine put me off.

Nevertheless, I am happy with the recent performance of the share price. And looking to pare down my holding if it comes close to KayHian's target price. It has been a long wait.

You could have followed too closely on the fall of share price and not enough on the management-directed evolution of the business during the last O&G industry downturn - which was unprecedented, and those companies which over-extended themselves or over-borrowed are now mostly dead or near to that. Because Penguin has been conservatively managed from before the industry downturn until now, the company has survived and now emerged stronger than before. So not all companies would suffer in the same way in an industry downturn, and those who can identify the stronger players would stand to profit handsomely by buying into them for the cheap in the depth of an industry downturn.  

Do you have any names on those busted or near busted companies? Otherwise any names for peers for Penguin, are there any listed ones?

[CY09]

Hi JH_SW

Let me help you on this, they are:

Ezra Holdings
Otto Marine
Triyards
Nam Cheong
Marco Marine
Ezion Holdings
Viking Marine and Offshore
Technics Oil & Gas
Charisma Energy
ASL Marine
Swissco
Pacific Radiance
POSH

[dydx]

Do you have any names on those busted or near busted companies? Otherwise any names for peers for Penguin, are there any listed ones?

Among the O&G and related companies on SGX, those gone kaput are well documented, and unfortunately too many! It is even sadder many still ended up kaput after having raised fresh capital through rights issues or share placements.

When compared with the others, Penguin is special case which suffered when, following the plunge in oil price, the O&G industry went down but has emerged from it a much stronger business now, and the company achieved this without asking shareholders for new capital.

[jh_sw]

Many thanks CY09 and dydx! That was quite a bunch, will have a look through them!

Makes Penguin's development the past years even more impressive indeed! The financial prudence seem to have paid off. Should be able to rise strong with a lot less competitors now then.

Wise word from the CEO in regards to saying somewhat in line with "borrowing to build stock is a straight line to hell"

[boomaroo]

Hi Guys,

This is my first post/hope to contribute in this forum! I have been reading for a while though... :-) (From KE Trade 28 Jan 2020)

• Revenue recovery in 2017 and 2018 due to increasing demand in their 2 core business lines. 
  
  
• Six-fold increase in net profit from 2017 to 2018.
  
  
• Dividend of 1.25 cents declared for FY2018, up nearly 300% from FY2017.
  
  
• Several growth initiatives ahead.
  

·       Penguin International Limited (SGX: BTM) is a designer, builder, owner and operator of aluminium high-speed craft. The group owns and operates a fleet of crewboats and passenger ferries. Penguin also designs and builds a variety of high-speed craft such as patrol boats, fire-fighting search and rescue vessels and security vessels. The group operates two shipyards in Singapore and Batam, Indonesia.
·       Penguin has two main brands: Flex and Pelican. Pelican is a brand for crewboats, while the Flex Family consists of a range of high-speed commercial craft such as multi-role crewboats, security boats and passenger ferries.
·       Penguin builds and books the assets on its balance sheet and sells the vessels off from time to time. In addition, the chartering division rents out the vessels to earn income on a regular basis.

·       Evaluating Penguin International using 4 financial metrics

·       1. Revenue and Net Profit Growth
·       [img=919.3203125x344.65625]https://mail.google.com/mail/u/0?ui=2&ik=7cc8a7d18a&attid=0.1&permmsgid=msg-f:1656930608683481936&th=16fe999c1c0cfb50&view=fimg&sz=s0-l75-ft&attbid=ANGjdJ-IhCQoC2Bb8i-wpOL4_FvYXcjHqH8iXMdAyvxXqRXuMQbHzAFR4gqFTKbR72yeZCr9mcpyb1UUokiJjTbkP_EDHoKg8Db-0n3BFfGU2vON6Kvjt-2gE0p82PE&disp=emb[/img]
·       Sourced from WebPro
·        
·       Penguin's business functions are closely tied to the plight of the oil and gas industry. The collapse of oil prices during year 2014 – 2015 led to a plunge in charter rates and utilisation, resulting in revenue dropping from a high of S$164.8 million in FY2014 to a low of S$33.4 million in FY2016.
·       FY2016 continued to be a bad year for Penguins when the group did not manage to sell a single stock crewboat, had to freeze salaries, reduce headcount and impair vessel values. Moving forward, FY2017 and FY2018 saw a recovery in demand for the group's vessels and improvement in the charter rates.
·       This spurred the group to embark on building newer models with improved features to boost its fleet expansion and renewal. Revenue soared back up to S$107.3 million in FY2018, while net profit recovered strongly to S$13.6 million from a loss of S$6.4 million in FY2016.
·       For 9M2019, the recovery in demand is still evident. Penguin’s shipbuilding, ship repair and maintenance division recorded a 60.1% year-on-year jump in revenue, while its chartering division enjoyed a 17.5% year-on-year revenue boost.
·       Total 9M2019 net profit more than doubled to S$13.9 million from S$6.3 million a year ago and has already surpassed FY2018's full-year net profit.
·       2. Gross and Net Margins
·       [img=1357.9921875x220.6640625]https://mail.google.com/mail/u/0?ui=2&ik=7cc8a7d18a&attid=0.2&permmsgid=msg-f:1656930608683481936&th=16fe999c1c0cfb50&view=fimg&sz=s0-l75-ft&attbid=ANGjdJ9M9ROE3GIafu90opKe-dtdX8jySjU-8dD3Vm00Lg2m-NLaAOR6Fj6oecqU_8S1jCj6ovzyadHKmMvJnMhUOj6qQ9m_nuNwXf0MiouP_WlFUYfUg8j5qqVG1nU&disp=emb[/img]
·       Sourced from WebPro
·       Different levels of yard utilisation have resulted in the fluctuation of Penguin's gross and net margins across FY 2016 and FY 2017.
·       Net margins also moved in line with both the group's ability to sell its boats and charter rates. The table above highlights that the company’s margins could potentially reach up to 17-18%, as shown in FY2014 and FY2015.
·       3. Balance Sheet
·       [img=1084.6640625x589.3203125]https://mail.google.com/mail/u/0?ui=2&ik=7cc8a7d18a&attid=0.3&permmsgid=msg-f:1656930608683481936&th=16fe999c1c0cfb50&view=fimg&sz=s0-l75-ft&attbid=ANGjdJ-uf9Sh9hIhyzdPcjsiSijgKCt1SLil_M5pkcOSPkSwMSYOYh-R0qHJvCETHknmXzNxjGxJ215zQ4D5ALk8kWpjrRu2PM5LI2_-KB6oJwp8mtL8s7R374g3UA8&disp=emb[/img]
·       Sourced from WebPro
·       Penguin has always maintained a healthy cash hoard as seen from the 5-year snapshot above. The cash balance dipped to a low of S$18.7 million in FY2016 but subsequently jumped to a high of S$53.5 million as of 30 September 2019.
·       The group also managed to pare down its total debt from a high of S$13.2 million back in 2015 to around S$1.6 million as of Sep 2019. Currently, its total debt/equity ratio is at a low 0.01x.
·       4. Dividends
·       [img=1320x201.328125]https://mail.google.com/mail/u/0?ui=2&ik=7cc8a7d18a&attid=0.4&permmsgid=msg-f:1656930608683481936&th=16fe999c1c0cfb50&view=fimg&sz=s0-l75-ft&attbid=ANGjdJ_B3_fprYoZszZvNxSp93OvB6cqIee1WgHXQWNGIL4trJFrCFWmqjRy5hHhqgm3L1cFKDQwf-hZIdLMAWQjO1qaQEGSdbZojYAbrtz4h_vWmKIGzdTn9JBKTdw&disp=emb[/img]
·        
·       The dividend history has been erratic for Penguin due to the challenges that surfaced in FY2016. FY2014 was a year of bumper dividends for the group before it entered rough waters and had to eliminate dividends in FY2016 due to losses.
·       With a business recovery in place, the group has also restored dividend payments. Based on FY2018's dividend of 1.25 cents and the last traded share price of S$0.74, the shares offer a trailing dividend yield of 1.7%.
·       Conclusion
·       Based on the 4 financial metrics above, it’s clear that Penguin's business is highly cyclical and is tied to the health of the oil and gas sector. While the group has taken considerable effort to diversify away from over-reliance on just a few vessel types since FY2014, it was still badly hit by the downturn in FY2016 and had to take drastic measures to cut costs.
·       The group is working on several business development initiatives such as adding offshore windfarms as well as pursuing new build-to-order projects across various market segments. Penguin also plans to add more crewboats under Pelican Offshoreas charter and utilisation rates continue to improve.
·       The Middle East tensions may lead to a sustained O&G recovery, which bodes well for Penguin International. On the other hand, investors need to be wary of a potential cyclical downturn that may result from another oversupply situation.

[jh_sw]

Hi Boomaroo,

Many thanks for your analysis, very well written. Will be very interesting to see the financials that are due on what I think is a few weeks or so, to see if the strong business momentum continues.

[boomaroo]

Hi Boomaroo,

Many thanks for your analysis, very well written. Will be very interesting to see the financials that are due on what I think is a few weeks or so, to see if the strong business momentum continues.

Hi Jh_Sw,

The analysis is not mine but was done by Maybank Kim Eng. I thought to share it in this forum. The 4Q2019 results should be released in around 2 -3 weeks time. From the various analysis, it should still be a strong business momentum! (However the recent weakness in market seems to have dragged down the share price by a bit lately  )

[jh_sw]

Ah okey, missunderstood that - thanks for the clarification!

[boomaroo]

Penguin wins "Support Vessel of the Year" Award.

This is their Flex-42X crewboat which is designed and developed jointly by BMT (The UK Ship Design Company) and Penguin Shipyard. It seems the Flex crewboats are very well-received internationally! (Not just with the Africans :-))

Full story in below link;

https://www.bmt.org/news/2020/bmt-design...ear-award/

[BlueKelah]

Hi Boomaroo,

Many thanks for your analysis, very well written. Will be very interesting to see the financials that are due on what I think is a few weeks or so, to see if the strong business momentum continues.

Hi Jh_Sw,

The analysis is not mine but was done by Maybank Kim Eng. I thought to share it in this forum. The 4Q2019 results should be released in around 2 -3 weeks time. From the various analysis, it should still be a strong business momentum! (However the recent weakness in market seems to have dragged down the share price by a bit lately  )

Share price is Oil price dependent lah. back to lows if oil price hit 30 or 40 dollars again.