Penguin International

[dydx]

With a fast-enlarging revenue base growing at 56% YoY, and increasing profitability as measured by PBT growing at an even faster rate at 98.5% YoY and by a PBT Margin reaching a high 20.5% in the first 9 months, quite clearly Penguin is the most prolific ship/boat builder listed on SGX…..
http://infopub.sgx.com/FileOpen/Penguin_...eID=323397

I suppose with current FY's EPS running at $0.05, and backed by a positive outlook, Mr Market should be motivated to do his usual trick in revaluing the Penguin stock towards its justified fair value.

With an anticipated 5 cents per share EPS for current FY, should we expect a 1 cent dividend, instead of 0.5 cent per share previously, or more?

(happily vested together with fellow shareholders here)

While the results are excellent, not confident about a large end of year dividend. For the last 9 months, despite generating nearly $25m in profit, cash and cash equivalents have reduced by about $2m. Over $20m is represented by increases in inventories, receivables, deposits and prepayments. With a business that has grown its revenue by 56% YoY, there are bound to be large increases in these items. The increase in receivables, at 94%, needs watching. Cash has also been used for investment in new facilities, taxes and the previous dividend. While the company still has a generous cash buffer, being too generous with dividends at a time of rapid growth may not be the best policy - the money may be better retained in the company at this stage than returned to shareholders. I'd be happy with 0.5 cent, very happy with 1 cent, concerned if it was more than that.

Firstly, we know very well Penguin has a steady and conservative management and BOD. When the business was fast taking off in last FY13 (ended 31Dec13), and the management/BOD decided to spend on capex to significantly enlarge/upgrade its Batam yard and upgrade its Tuas (Singapore) yard, and also to launch new and improved boat models and increase its own fleet of "Flex" crew boats for chartering out - which has been bringing in a steadily growing stream of charter income and FCF - Penguin paid out a Final dividend of $0.005/share, from an EPS of $0.0245. Perhaps of equal importance, Penguin achieved the above by staying debt-free, relying on its own growing equity funds supplemented by customers' advance payments and normal suppliers' trade credit to fund the capex and the growing operation. Perhaps of even greater importance, Penguin has managed to grow its business base and at the same time raising efficiency and profitability, while maintaining maximum flexibility - by building and selling an increasing number of crewboats built-for-stock, increasing its own crewboat chartering activities by expanding its own fleet, selling crewboats from its existing fleet at good profits when opportunities arise, and raising its retained earnings backed by a growing cash reserve. All the above very positive development and evidences point to Penguin's business is enjoying a "sweet spot", and a very smart management at work.

The very significant improvement in the business based on the first 9 months' results of the current FY14 is a further confirmation of the above.

With no further major capex for the Batam yard anticipated, and assuming Penguin would continue to increase its fleet of crewboats at a measured rate (by say 2 or 3 crewboats a year on a net basis), I suppose Penguin's management and BOD should be soon thinking hard on how to reward shareholders - and themselves too, as they are and represent the major shareholders - from the expected high projected EPS of $0.05 for FY14. Since last FY13's Final dividend at $0.005/share was a conservative one, perhaps Penguin should consider paying out a one-third share of current FY14's earnings, or approx. $0.017/share, as a Final dividend. This is undemanding at all, as Penguin's B/S shows its net current asset and net cash balances have been growing nicely over time.