Penguin International Ltd - Phillip Securities 2019-05-17: Waddling Is Normal


Penguin International Ltd - Waddling Is Normal

  • PENGUIN INTERNATIONAL LIMITED (SGX:BTM)'s revenue is historically volatile and lumpy. No changes to our earnings forecast.
  • Jump in inventories, non-financial liabilities and asset held for sale point to a healthy outlook.
  • Balance sheet still in net cash position of S$43.8mn, or 45% of the market capitalisation.
  • Our BUY recommendation and target price of S$0.61 remain unchanged.

The Positives

Inventory is up 3x y-o-y, and assets for sale of S$6.3mn emerges.

  • This was because Penguin International builds vessels to stock; there are two ways to interpret the spike in inventories. It is either the company is now burdened with unordered vessels, or there will be significant recognition of sales in coming quarters. We take the later view due to the rebound in sales last year and improvement in offshore oil and gas activity.
  • Assets for sale was S$6.3mn compared to nil as at end December. It implies the company is converting its crewboat vessel(s) into security vessels for sale.
  • Penguin International does not disclose its order-book. Movements in the balance-sheet will provide a guide to the near term outlook.

Net cash of S$43.8mn with the rise in operating cash-flows.

  • Penguin International exited end-March 2019 with net cash of S$43.8mn, a marginal improvement from S$41.6mn as at end 2018. In 1Q19, Penguin International's cash from operations jumped by S$11.6mn due to better working capital.

Other payables and accruals doubled y-o-y and rose S$7.1mn q-o-q.

  • Another indicator on the balance sheet that can be an indicator of the future outlook will be the rise in other payables and accruals. Part of the liabilities inside this line item includes advance payments and deposits received from the customer that are not refundable. While not separately disclosed, we believe the S$7mn rise q-o-q is in part from deposits received.

The Negatives

Less charter income in the near-term.

  • Penguin International's revenue was down 39% y-o-y in 1Q19. Charter income was not disclosed. However, the earlier mentioned conversion of crewboats to security vessels would have reduced the number of vessels available for charter.
  • Separately, there was a large $9.3mn capex this quarter. Penguin International mentioned this was to expand its operating fleet. As a result, we expect charter income to recover in the following quarters.


  • Historically, revenue is very lumpy and volatile for the company. Over the past three years, revenues have swung from S$6mn to $41mn per quarter. Sale of vessels in the inventory and progress recognition of vessels under contract will not be not even every quarter.
  • There is no change in our positive outlook for the company. As per our initiation report, the three drivers to growth are the revival in offshore oil and gas activities, increased market share and the successful diversification outside the core crewboat and security vessels. See report: Penguin International Limited - This Penguin Can Flex & Fly.

Maintain BUY with an unchanged target price of S$0.61

  • We have kept our earnings forecast and target price unchanged.

Paul Chew Phillip Securities Research | https://www.stocksbnb.com/ 2019-05-17
SGX Stock Analyst Report BUY MAINTAIN BUY 0.610 SAME 0.610