Penguin International Ltd - CGS-CIMB Research 2019-08-05: 2Q19 Tap That Fleet


Penguin International Ltd - 2Q19 Tap That Fleet

  • PENGUIN INTERNATIONAL LIMITED (SGX:BTM)'s 1H19 net profit of S$8.4m (+47.8% y-o-y) was in line at 56%/52% of our/consensus (S$14.9m/S$16.1m) FY19F.
  • We maintain forecasts for now as deliveries can be lumpy. Higher 2Q19 chartering and shipbuilding revenue took 1H19 revenue to S$67.9m.
  • We like Penguin International for its robust balance sheet and that its vessels are not part of the oversupplied offshore oil market. Maintain ADD and Target Price.

1H19 revenue jumped 48.7%

  • PENGUIN INTERNATIONAL LIMITED (SGX:BTM) made great strides, with 2Q19 revenue jumping 164.1% on 2Q19 chartering (S$6.8m/+17.9% y-o-y) and shipbuilding revenue (S$45.3m/+224.3% y-o-y).
  • 1H19 chartering revenue was up (+48.7% y-o-y) to S$67.9m; with the shipbuilding segment (S$55.1m) growing 58.2% y-o-y. 1H19 chartering division of S$12.8m also saw healthy growth (+18.2% y-o-y).
  • We estimate that Penguin International delivered at least 3-4 stock vessels and some of its Australian patrol boats (Penguin International secured seven patrol boat orders in FY18) in 2Q19.
  • It also guided that its chartering division saw improvements in utilisation and charter rates.

Margins down slightly, but likely due to product mix

  • Penguin International's 2Q19 GP margins were 25.7% (vs. 2Q18: 30.8%). 1H19 GP margins came in at 27.8% (vs. 1H18: 28.3%).
  • We are not concerned about the lower GPMs as this was likely due to higher Build-To- Order (BTO) vessel projects within the quarter. Penguin International had actively diversified its offerings to balance between speculative and stable products, hence this was as expected.

Net income jumps 47.8%

  • Penguin International's 2Q19 other income was S$2.5m (vs. 2Q18: S$5.5m); taking 1H19 other income to S$3.6m (vs. 1H18: S$5.7m) on lower sales from the Group’s operating fleet.
  • All in, the robust topline and sustained other income led to 2Q19 net profit growing > 100% to S$7.5m (2Q18: S$3.6m) and 1H19 to S$8.4m (vs. 1H18: S$5.7m).

Robust balance sheet

Maintain ADD; a stable ship

  • We like Penguin International as it is profitable, cheap vs. domestic peers and in a net cash position.
  • Penguin International has mentioned plans to add more crewboats to its operating fleet, have added passenger ferries to its build-to-stock (BTS) programme and is working to secure more build-to-order (BTO) projects, which we believe will support 2H19 net profit growth.
  • We value Penguin International at 1x FY19F P/BV (excluding c.S$5m investment in Marco Polo), at a 20% discount to its small-to mid-cap peers’ 1.2x aggregate P/BV pre-oil crisis.

Cezzane SEE CGS-CIMB Research | 2019-08-05
SGX Stock Analyst Report ADD MAINTAIN ADD 0.720 SAME 0.720