Penguin International

[luckystar]

Just an observation. Seems like the more active discussions on Penguin at VB, the higher the stock flies. I have been a long time investor in this stock, and still holding. The buddies here have been very insightful (both pro and against this stock) and contributed tremendous to my deeper understanding of this company. Well done guys, please keep up the active discussions.

[weijian]

Anyway I think this forum maybe shd define what is the definition of value investment otherwise we hv unhealthy discussion.

hi GenS70,

VB.com has been around for some time, maybe close to 10years in current form. Personally, i have been around for maybe majority of that, but was only a Moderator for the last 3 years.

This forum has its ups and downs, but it continues to evolve. If Buffett evolved from Graham's cigar butt (companies which have no moats but worth the last puff) to activist investing (buying big stakes in companies and pressure their Mgt to sell off their assets) to Philip Fisher's quality stock investing (See's Candies as the start), then value investing will continue to evolve.

That said, while the methods of value investing evolves, but its principles of (1) Invest with a margin of safety, (2) Treating every investment as a business, (3) How to handle our relationship with Mr Market, are timeless.

Some folks here are confused about differentiating between principles and methods of value investing, but not the majority here.
When we are clearer about the differences above, we all grow wiser.

While value investing evolves, but what we do know these will never be value investing and not welcomed on VB.com for discussion - (1) buying in anticipation to sell to bigger fools, (2) price momentum with litle consideration to fundamentals, (3) Technical charting (candlelights and stuff)

Moderator

[Squirrel]

Just curious, my post was #1181 just a while ago. Checking back now it became #1180. What happened? Could someone retrospectively delete their prior posts? How do we find out if someone did?

[weijian]

Just curious, my post was #1181 just a while ago. Checking back now it became #1180. What happened? Could someone retrospectively delete their prior posts? How do we find out if someone did?

hi squirrel,

A post can be deleted by the person who posted it or by Moderator. For this particular case, the deletion was done by me as the post was sarcastic in delivery and out of topic (a new person who browses through this thread would not need to read that at all). It was only moderated today (abit delay) as i re read the posts again. Apologize for the delay n probably the confusion that came with it.

If need to know more whether anyone did sk, you could check with the Moderators like me, CY09 and cyclone if it is important

Hope it clarifies.

Moderator

[¯|_(ツ)_/¯]

It is with an humble heart and open mind that I hope valuebuddies will benefit from investing in Penguin.

---

OP asked the following questions and generated a lot of response from various valuebuddies.
Let me do a check:
1. Mind to explain what exactly are <Penguin> products?
  Squirrel (#1068)
2. How those products <help its customer>?
 dydx (#1157)
3. Who are the competitors?
 Squirrel (#1180)
4. Why are they better than their competitors?
 dydx (#1174)
5. Why do customer choose Penguin over Chinese or Korean builders?
 dydx (#1170)
6. What moat does Penguin has?
 GenS70 #1178)
7. How many % of your portfolio would you invest in Penguin? So you can sleep soundly.
 This one is very difficult to answer. However, this post by Karlmarx should gives you some assurance

(Penguin has adequate liquid balance sheet to keep company out of financial danger)
(Penguin is still in a growth mode #1107)

---

I hope valuebuddies had a chance to take a look at Penguin.
Today at 60cents with PE 8 and PB 0.8, whehter Penguin is still a value investment is still debatable.

However, it's a prudent company with solid balance sheet should continue to exist for next 10 years.
Given some tailwind in O&G sector, it's revenue and profit should continue to grow in next few years.

What's exciting to me is the successful transformation of it's business beyond O&G sector.
Like what a relatively quiet valuebuddies Dossers say 
(Evolution beyond core #1081)

[img=639.9999389648438x479.9999694824219]https://www.thesun.co.uk/wp-content/uploads/2019/10/NINTCHDBPICT000527124769-e1569930552383.jpg?w=960[/img]
=========== Signature ===========

感恩

[karlmarx]

Lest some of my comments be misinterpreted as endorsing an investment in Penguin -- which I am not, especially after the run up in share price over the past few months -- I should add some comments.


1) Given the very low dividend payout ratio, but primarily my lack of knowledge on the market and competitive landscape of small-scale shipbuilding in the region, I will only put a very small portion of my money in such a company -- if its shares are sold at a price that is to my satisfaction -- as I have earlier stated. How much am I willing to pay? Refer to earlier posts.

2) Penguin's recent history has indeed shown it to be very conservative in its financing. But this can also be said for many other listed companies in Singapore. In fact, I am quite confident than more than half of the listed companies in Singapore will also be around in the next 10 years, including those with less than pristine balance sheets. 

SPH, M1, Starhub, HPHT are but some of the companies I think will still be around. Small caps like Tiong Woon, Sarine, Khong Guan, OKP, and and most of the palm oil plantations. How will they do? I don't know. But I do remind myself not to confuse a company's existence with a company's prosperity. 

3) When I remarked that "Penguin is still in growth mode," the point is made in reference to its reinvestment of profits into the business -- in the form of working capital (more boats) and investments (in new yards, or in shares of other companies) -- to the effect that the shareholder receives little/no dividends. 

Hence, growth in capital spending should be understood to be very different from growth in profits and dividends. Growth in profits and dividends is what investors ultimately want, but for Penguin, has yet to materialise. Other examples of companies which I believe are also in "growth mode" include Uber, WeWork, Razer, and Carousell. How much profits and dividends will these companies, and Penguin, be throwing up in the future? That is something for prospective investors to find out for themselves.


I think I have been clear in my elaboration on these 3 points in previous posts. So I hope my comments will not be taken out of context.

If a (Penguin) shareholder is looking for assurance -- perhaps so as to sleep soundly -- my opinion is to sell your shares.

[dydx]

UOB Kay Hian just released its initiation report.
https://research.uobkayhian.com/content_...45b1265f21

[¯|_(ツ)_/¯]

@karlmarx,
Let me apologies for mis-quoting you.
I re-read your various posts and I still did not realised why I had made such a blunder.

I did read your post with a tinted glass but even I re-read again,
your posts were very well constructed with balanced viewpoints (identify the +ve and also potential risks).
Overall, an excellent piece of analysis, I think.

Kindly accept my apologies from mis-quoted you.
Your sell call is crystal clear to me now.

Sorry.
Allow me share my thought process and YMMV.

1. Moving Average MA vs EMA
In trading, we frequently use moving average to gauge the immediate price action.
With a little bit of experience/training, we will not use MA, instead we will be using EMA,
simply because a higher weightage should be given to latest prices and a lower weightage should be given to price many ticks away.

When I read Penguin AR and also Q-o-Q results, I tend to put more emphasis on recent few Q than says 10 Q away.


2. Penguin is in transformation mode - managed by professional (instead of founder)
10 years ago, the current team of Penguin senior management take over and made a lot of bold steps to transform the company.

I always like this particular example.
There were 3 companies operating the ferry services between Batam and Singapore.
They were competitors and fighting to grab the same pool of customers.
Penguin is one of them. There were no winner. Everyone struggled.


Guess what?
Penguin sold off it's ferry services and the competitors become partners to Penguin.

Did you hear what I say?

Penguin had turn 2 of it's strongest competitors to be it's strongest customer.

Another example.
Penguin is well know for building ahead of buyer placing a order.
In order to do this, Penguin need to inculcate customer to be willing to buy a standard boat (aka not custom).
Strange thing is, instead of fitting with standard cheapo materials, Penguin splurge and use top of the range equipment.
Customer like it, customer like the design and customer buy it at a high price (for a standard boat).

This is rather amazing. Typically, we would think that custom boat should command a premium.
However, we had seen especially during current O&G crisis, Penguin boat is well sought after.
Selling at a good margin and cash started to flow in faster and faster.

Yet another example.
I says that Penguin niche is to build high quality standard boat, yet Penguin is willing to upgrade/update their boat to allow customisation.
A standard boat fit with machine gun and also bullet-proof posts become a security boat that's hot selling.

A design and build SCDF fire-fighting boat that has highest grade CBR filtration, decontamination cubicles and pressurized cabins. 

You see these customisable boat in the initiation report introduced by valuebuddies dydx above.
Open it up and see the pictures yourself.

Amazing, isn't it?
On one hand, the company niche is in standard boat.
On the other hand, the company is 100% capable of re-do the standard configuration or design a brand customisation.

A bit like split personality and yet Penguin did it.

Recent wins from different geography region and countries, speaks for themself.

Penguin management are professional.  They know what customers needs and they had successfully steer the entire company to capture these opportunity beautifully.

Amazing, isn't it?

3. Capital allocation 
I learn from you that there are 3 ways to allocate capital and of course Squirrel added a 4th way too.
I felt that Penguin management is top notch in term of capital allocation.
O&G crisis is no joke.
How many O&G company fold/folding?
How many shipyard fold/folding?
Why did Penguin not only managed to survive the crisis but emerged with better numbers?

Penguin management are professional.
They know what's the best interest for Penguin.
Debt - my friend - reducing debt is the best way to stay resilience in all weather condition.
Dividend will come, when the crisis is over.

After debt (which ensure Penguin survival many years), come growth.
Money need to be pump into growth.
That's exactly what they did.
Money was pump into building boat that nobody is ordering aka no buyer hur?

When the crisis is over, these boat was selling like hot cake and cash kept flowing in.

So, debt number 1, growth number 2 and dividend has to be number 3.
Understand?

In AGM, OPMI scream for dividend.
What we are seeing is dividend is going up SGD 0.0045(May18), SGD 0.0125 (May19).
 
Now, I don't dare to make a prediction on the dividend.
I have faith that Penguin management will be paying at least SGD 0.0125 in May20 given that their numbers should be getting better and better.
Of course, if $$$ is needed to pay off debt or grow the business further, 
I'm ok to wait for another few years.

Bear in mind that Penguin is really very small and it's in a growth mode 


I think this is long enough.
I still have a lot to says but you get my idea.
Do you?


=========== Signature ===========

感恩

[Squirrel]

Lest some of my comments be misinterpreted as endorsing an investment in Penguin -- which I am not, especially after the run up in share price over the past few months -- I should add some comments.


1) Given the very low dividend payout ratio, but primarily my lack of knowledge on the market and competitive landscape of small-scale shipbuilding in the region, I will only put a very small portion of my money in such a company -- if its shares are sold at a price that is to my satisfaction -- as I have earlier stated. How much am I willing to pay? Refer to earlier posts.

2) Penguin's recent history has indeed shown it to be very conservative in its financing. But this can also be said for many other listed companies in Singapore. In fact, I am quite confident than more than half of the listed companies in Singapore will also be around in the next 10 years, including those with less than pristine balance sheets. 

SPH, M1, Starhub, HPHT are but some of the companies I think will still be around. Small caps like Tiong Woon, Sarine, Khong Guan, OKP, and and most of the palm oil plantations. How will they do? I don't know. But I do remind myself not to confuse a company's existence with a company's prosperity. 

3) When I remarked that "Penguin is still in growth mode," the point is made in reference to its reinvestment of profits into the business -- in the form of working capital (more boats) and investments (in new yards, or in shares of other companies) -- to the effect that the shareholder receives little/no dividends. 

Hence, growth in capital spending should be understood to be very different from growth in profits and dividends. Growth in profits and dividends is what investors ultimately want, but for Penguin, has yet to materialise. Other examples of companies which I believe are also in "growth mode" include Uber, WeWork, Razer, and Carousell. How much profits and dividends will these companies, and Penguin, be throwing up in the future? That is something for prospective investors to find out for themselves.


I think I have been clear in my elaboration on these 3 points in previous posts. So I hope my comments will not be taken out of context.

If a (Penguin) shareholder is looking for assurance -- perhaps so as to sleep soundly -- my opinion is to sell your shares.

Hi karlmarx,

If someone has read through the thread, its more than obvious you are not advocating a buy on this company even before the run up, much less now. Its even more obvious for me since that is when we first crossed swords/opinions. I do get however, your stand of not having your posts misconstrued as endorsement for Penguin. That's very fair, as it can be easily misinterpreted to be the case.

I would like to however point out on your comment of "Hence, growth in capital spending should be understood to be very different from growth in profits and dividends. Growth in profits and dividends is what investors ultimately want, but for Penguin, has yet to materialise.". That is just factually untrue. The company's profit has increased from a net loss of $(6.4)m in 2016 to a net profit of $13.6m in 2018 and TTM profit of $16.3m currently, increasing every single year. Dividends has gone from 0 from FY2016 to 0.45 cents from FY2017 and then to 1.25 cents from FY2018. Simply put, that statement is untrue. Much as you would like forum readers to not misunderstand your position, I would like for you to be careful in your selection of statements as well. hopefully no offense here.

As for me, I am sleeping soundly with Penguin in my portfolio even though the percentage that it takes up has nearly doubled. I believe in order to have extraordinary returns, we have to be patient and let the position run. I do believe Penguin is at the start of the profit inflexion point. Time will ultimately tell, and hopefully time holding onto this company's shares will reward shareholders.

[luckystar]

Looking at the persistent buying of this stock, would it be too far fetched to speculate that this stock may itself be a takeover target?

I understand that Penguin has bought out some competitors during the O&G crisis. So whoever buys out Penguin now would be killing a few birds with one stone.