Penguin International

[Dosser]

It will be very interesting to see what is said in the Q2 statement, due in the next 1 to 2 weeks. Issues for me are:

1. How quickly have they managed to cut costs, in response to the changed market. I remember being very impressed with how a lot of small cap Singapore companies slashed costs quickly in response to the downturn in 2008. Is Penguin another company that can turn on a dime, or not?
2. Have they pulled back sharply on boat building? The danger is that they keep building for stock, with few sales, which would keep up (on paper) boat building profits, but if those boats are just swinging at anchor, those profits would not be real, at least until the boats are sold or leased. There were indications in the 1Q statement that they were pulling back to some extent.
3. Is there any sign that there may be more leasing of boats, rather than sales? - one reaction to a downturn by client companies is to lease rather than buy equipment, to minimise capital expenditure.
4. Are they managing to develop further in the non-O & G market, like the 3 high speed ferries sold last year?

Answer to those questions will help show just how competent/driven/prudent the management of Penguin is. Trouble is, they tend to be reticent in giving out a lot of this information, although some of it can be gleaned from the numbers.

This time round the sharp and drastic fall in oil price has hit the entire offshore oil & gas sector like a bolt of lightning, hurting it with a devastating impact. It is likely that only solid companies - with proven products/services, diversified revenue streams, conservative balance sheets, and more importantly, a competent/driven/prudent management - will survive, and some may even come out the storm stronger, by taking advantage of any good opportunities that may emerge. Can we count Penguin as one of them?

[CY09]

Hi Dosser,

Penguin does have a build to stock model. However, for boats that are built for stock or for its internal fleet, revenue is not recognised.

From my guess estimate. Penguin has a yard capcity capable of building 55-60m revenue worth of ships per quarter at peak capcity. Penguin's Q1 number gve a glimpse of the shipyard's ability to build approx 50m worth of ships (35m was recognised as revenue only, while the rest was classified as PPE in its fleet expansion). This aspect was the one which worried me becuase penguin added a year worth of fleet expansion in the first quarter. Furthermore, given its low utilisation of current fleet, it does not make sense to still expand your fleet when there are existing ships which are unchartered.

And from last year's info, it is understood penguin has external order backlog, able to keep them busy till 3Q2015. The fact that they did a massive expansion in Q1 Fy 15 was what baffled me when they had a supposedly 9 months backlog of external orders. The only reasonable explanation i can deduce is trying to time the delivery of orders to concide with a favourable USD/SGD exchange rate

[greengiraffe]

I m extremely fearful of build-to-stock model. However, u may term it - it is speculative new build. Mgt reading of the mkt demand is extremely important.

Jaya was brought to its knees during the last GFC as a result of the model and never really recovered b4 PE owner eventually sold the entire offshore fleet to Australian listed Mermaid...

Odd Lots Vested
GG

Hi Dosser,

Penguin does have a build to stock model. However, for boats that are built for stock or for its internal fleet, revenue is not recognised.

From my guess estimate. Penguin has a yard capcity capable of building 55-60m revenue worth of ships per quarter at peak capcity. Penguin's Q1 number gve a glimpse of the shipyard's ability to build approx 50m worth of ships (35m was recognised as revenue only, while the rest was classified as PPE in its fleet expansion). This aspect was the one which worried me becuase penguin added a year worth of fleet expansion in the first quarter. Furthermore, given its low utilisation of current fleet, it does not make sense to still expand your fleet when there are existing ships which are unchartered.

And from last year's info, it is understood penguin has external order backlog, able to keep them busy till 3Q2015. The fact that they did a massive expansion in Q1 Fy 15 was what baffled me when they had a supposedly 9 months backlog of external orders. The only reasonable explanation i can deduce is trying to time the delivery of orders to concide with a favourable USD/SGD exchange rate

[brattzz]

They are going for market share... to populate the markets with their products at a mass-market price..
To keep out the competitors.

Let's see if this strategy succeeds!

[CityFarmer]

Hi Dosser,

Penguin does have a build to stock model. However, for boats that are built for stock or for its internal fleet, revenue is not recognised.

From my guess estimate. Penguin has a yard capcity capable of building 55-60m revenue worth of ships per quarter at peak capcity. Penguin's Q1 number gve a glimpse of the shipyard's ability to build approx 50m worth of ships (35m was recognised as revenue only, while the rest was classified as PPE in its fleet expansion). This aspect was the one which worried me becuase penguin added a year worth of fleet expansion in the first quarter. Furthermore, given its low utilisation of current fleet, it does not make sense to still expand your fleet when there are existing ships which are unchartered.

And from last year's info, it is understood penguin has external order backlog, able to keep them busy till 3Q2015. The fact that they did a massive expansion in Q1 Fy 15 was what baffled me when they had a supposedly 9 months backlog of external orders. The only reasonable explanation i can deduce is trying to time the delivery of orders to concide with a favourable USD/SGD exchange rate

The internal sales will be eliminated upon consolidation, as CY09 stated.

Penguin revenue, includes both chartering and boat-building. I am estimating that boat-building output in 1Q2015, was 44 mil, with 13-14 mil as internal sales. The chartering revenue was estimated as 5 mil, which is lower than FY2014.

I reckon USD/SGD exchange rate is irrelevant for order, with hedged cost for order.

(supplementing the view)

[touzi]

just an insight to share, penguin international is a customer of my company, there were a lot of orders from them during the second half of last year, but during the past few months, they have requested to delay deliveries, for most of the projects

-not vested-

Would you be able to share with us what kind of product your company supplies to Penguin? Thanks.

[touzi]

It is likely that only solid companies - with proven products/services, diversified revenue streams, conservative balance sheets, and more importantly, a competent/driven/prudent management - will survive, and some may even come out the storm stronger, by taking advantage of any good opportunities that may emerge. Can we count Penguin as one of them?

The companies that came to my mind are actually Keppel Corp and Boustead. Penguin do not have diversified sources of income. However Penguin's strong balance sheet and well recognized product are huge advantages.

[jjlim84]

just an insight to share, penguin international is a customer of my company, there were a lot of orders from them during the second half of last year, but during the past few months, they have requested to delay deliveries, for most of the projects

-not vested-

Would you be able to share with us what kind of product your company supplies to Penguin? Thanks.

Propulsion engines

[BlueKelah]

wah jjlim thats quite a bit of useful "outsider" information! thanks for sharing. sure the VBs holding PG will be very interested to learn when the orders start coming in for more again.

This is the kind of industry information not previously available to public without the internet and great forums such as these..

if next results out shows decline, means your info is veli veli gud and accurate leh!

-n v-

[greengiraffe]

just an insight to share, penguin international is a customer of my company, there were a lot of orders from them during the second half of last year, but during the past few months, they have requested to delay deliveries, for most of the projects

-not vested-

Would you be able to share with us what kind of product your company supplies to Penguin? Thanks.

Propulsion engines

engines is a critical component of a boat and hence its an important derived demand info...

thanks for the info buddy