Excerpts from Lim & Tan Research report
We refer to our initiation and previous update reports on Penguin International which we highlighted the following salient points:
Trading at 5.6x PE and 0.7x PB (and with half its market cap in net cash), we think that the significant drop from recent its 52 week high of $0.79 gives investors another opportunity to invest in a fundamentally sound company at a great price.
As such, we maintain a BUY recommendation on Penguin and with a target price of S$0.70, pegged to 1.0x P/BV valuation methodology, representing a 41% upside. |
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Penguin International ($0.495, up 4.5 cents) released its annual report yesterday with an optimistic Chairman and Managing Director’s outlook statement.
Firstly, they highlighted that since 2015-2016, they have successfully diversified their revenue streams across different industries (namely offshore oil and gas, offshore wind, public transport and tourism, maritime security and government projects), while striking a balance between build for-stock programmes and build to-order projects.
Penguin has also built up a sustainable crewboat chartering business that complements their shipbuilding business. Secondly, they recognized that the best way to stave off complacency and arrogance is to think and behave like an underdog at all times, regardless of how successful you are.
Hence, Penguin takes nothing for granted and fight hard to secure and retain every sale, every client, every dollar earned. In the same spirit, they do not take competitors for granted either.
That is why they are extremely circumspect whenever they make public disclosures. While acknowledging that they might be too terse, it has resulted in some shareholders not fully appreciating what Penguin is and what they do.
As such, Penguin has released slightly more information in their latest annual report, and are choosing to say more this time round largely because they are able to do so, now that their products, markets and clients are more diverse than before.
Penguin also acknowledged the importance of cash, given that a significant portion of their revenue and profit comes from the sale of stock vessels, and there is a need to conserve an appropriate level of cash to fund its stock programme, which entails research and development, design and engineering, procurement and constructi on and – if the market moves against Penguin, holding power is of essence.
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Fair dividend |
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Lastly, Penguin noted in their letter that it believes that networking is essential for business. Penguin chooses quality over quantity in their networking and try to build up pure human connections based on shared values.
Penguin believes in forming deep meaningful long-term relationships from networking, rather than merely transactional and short-lived ones.
Penguin sees themselves as being in a delicate eco-system in which they draw from and contribute to.
This belief is manifested in their relationships with suppliers and subcontractors, and is a symbiotic relationship built on mutual respect and shared values.
Mindful of its place in the local eco-system, Penguin also tries as much as possible to connect with fellow Singaporean homegrown companies when purchasing equipment and materials.
