PENGUIN INTERNATIONAL LIMITED (SGX:BTM)
Penguin International Ltd - 3Q19 Stellar Fleet
- Penguin International's 9M19 net profit of S$13.9m (+120.8% y-o-y) was ahead at 94%/81% of our/consensus FY19F (S$14.9m/S$17.2m).
- The outperformance came mainly from other income, lower tax expense and lower operating costs. We lift FY19-21F EPS by 21.6-32.6%.
- Maintain ADD with a higher target price on an unchanged 1x P/BV but now on FY20F BV/share. Robust balance sheet and niche vessel sales are its forte.
3Q19/9M19 revenue grows 47.6%/48.4% y-o-y
- PENGUIN INTERNATIONAL LIMITED (SGX:BTM) made further strides, with 3Q19 revenue jumping 47.6% on higher chartering (S$8.3m/+16.4% y-o-y) and shipbuilding revenue (S$20.8m/+65.3% y-o-y). See Penguin International Announcements.
- 9M19 revenue grew to S$97.1m; with the shipbuilding segment (S$76m) growing 60.1% y-o-y and the chartering division (S$21.1m) growing 17.5% y-o-y.
- We estimate that Penguin International delivered at least 3-4 stock vessels and the rest of its Australian patrol boats this quarter. It also guided that its chartering division saw improvements in utilisation and charter rates within the quarter.
Other income stays strong
- Penguin International's 3Q19 other income was S$2.2m (vs. 3Q18: S$0.3m), largely on higher fleet vessel sales, taking 9M19 other income to S$5.8m (vs. 9M18: S$6m). While this was lower versus 9M18’s sales, it still came in ahead at 97% of our previous FY19F estimate of S$6.0m.
Lower opex and tax expense; Net income jumped 120.8% y-o-y
- Penguin International's 9M19 operating expenses came in at 21.1% of 9M19 sales (versus our expectation of 24.1% of FY19F), while 9M19 effective tax rate was also at 9.1% (vs. our estimate of 12.5% for FY19F). The better 9M19 operating leverage and lower tax led to better net profit margins of 14.4% (vs. our FY19F estimate of 11% and leading to a jump in 9M19 net profit to S$14.4m, +120.8% y-o-y).
Raising FY19-21 EPS by 21.6-32.6%
- Penguin International mentioned that it continues to see a pick-up in its shipbuilding and crewboat chartering activities. It also recently added offshore windfarm Crew Transfer Vessels to its internally funded build-to-stock programme which will expand its product range yet again.
- Given the outperformance in its 9M19 financials, we raise FY19-21F EPS on the back of lower opex, higher other income and lower tax expenses.
Maintain ADD
- We like Penguin International as it is increasingly profitable, cheap vs. domestic peers and in a net cash position. We continue to value Penguin International at 1x PBV (excluding investment in Marco Polo), but roll over to FY20F, still based on a 20% discount to its small-to mid-cap peers’ 1.2x aggregate P/BV pre-oil crisis. See Penguin International Share Price; Penguin International Target Price.
- Catalysts are higher ship sales and GPM.
- Risks are lumpy quarterly sales recognition, lower ship sales and chartering.
Cezzane SEE
CGS-CIMB Research
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https://www.cgs-cimb.com
2019-11-07
SGX Stock
Analyst Report
0.81
UP
0.720
