Penguin International

[dydx]

An old article (dated 3Jul11) on Penguin which was building at a rate of 10 "Flex-36" (the predecessor to the current "Flex-38" model series) crewboats in 2011, and the writer also mentioned Penguin having the capability to build well over 20 crewboats a year in 2012 and beyond.....
http://www.europeanoilandgas.co.uk/artic...ssueid=410

A more current article (dated 17Jun13) on Penguin's delivery of its 50th crewboat (a Flex-38SL) to the FEMCO Group for deployment off Russia's Sakhalin Island for Exxon Neftegas (a subsidiary of ExxonMobil).....
http://marinelog.com/index.php?option=co...tieth-flex

From Penguin's website.....
http://www.penguin.com.sg/
we know that there are more than 20 Flex crewboats under construction in 2013, allowing Penguin to make a claim that the group is "also the world's most prolific crewboat builder". Impressive!

[orang]

Technically, Penguin is a species of flightless bird so it cannot fly.

I'm a little perplexed by the recent interest in the company considering that its been in stock limbo for years. For a company that started as a ferry service company, I was a little taken aback when it decided to sell that business off. Concentrating its resources on the crew ship building segment seems like a risk considering that its yards is not of substantial size to reap economies of scale.

So what could be fueling the interest in this company out of the hundred on SGX that are under-performing and mediocre at best?

This could well be a classic case of an ugly duckling turning into a swan.

A peek at recent boat-building activities will see some stirrings of a turnaround.

1Q12 sold one crewboat
2Q12 sold two and added 3 to charter fleet
3Q12 sold 2 and added one to fleet
4Q12 sold 2 crewboats
1Q13 sold 3 and added 2 to fleet
2Q13 sold 5

In revenue terms 1H13 saw turnover almost doubled to $68.7m from $38m in the previous year.

The bottom line is a little more impressive chalking up $7.4m against $1.02m

Are we seeing a tipping point? Or is it an event which has occurred?

[dydx]

Crew Boat Market Reports by Marcon.....
http://www.marcon.com/library/market_rep...b02-13.pdf [Feb13]
http://www.marcon.com/library/market_rep...b05-13.pdf [May13]

[Ben]

Many players providing OSV are seeing better times now. Margin for building OSV is also improving. I also noticed that some companies are paying more attention to their chartering business, instead of just relying on ship building. Likewise for Penguin.

With Q2'13 net profit already exceeding the whole of last year, this year will be a banner year for Penguin. With zero debts and high cash hoard, I expect they will start distributing dividends again. Looking forward to their Q3 result announcement.

[dydx]

With 30Jun13 NAV/share already at $0.1547.....
http://infopub.sgx.com/FileOpen/Penguin_...eID=251420
, and EPS for 3Q and 4Q likely to exceed $0.015 in total (based on 2Q's EPS at $0.0089), Penguin's NAV/share at this FY13 fiscal year-end at 31Dec13 is expected to hit/exceed $0.17. Against the last done share price of $0.113, Penguin as a business showing strong current growth in both revenue and profitability appears grossly under-priced .

[dydx]

I thought the following page from Penguin's website has a lot of useful information on the group's capabilities as a specialist builder of its own design and "Flex" brand of multi-role crew boats.....
http://www.penguin.com.sg/our-subsidiari...rnational/

[kelvesy]

This is indeed an excellent company with good management capabilities, sitting on a good spot to ride on the recovery.

I take the recent capex of 10.5m as a preparation for higher volume of businesses. The other time where Penguin spent that much was 1H2012. I'll have to agree, with the promising quarterly results from 3Q and 4Q, this stock is grossly-underpriced.

To my knowledge, Penguin only sold their retail ferry ticketing business to Batam, Bintan and Karimun. I assume Pelican Ship Management (subsidiary) still operates ferry services from Pulau Tekong to SAF Ferry Terminal back and forth. Seems like a stable revenue source. As a NSF, I noticed that the on-board staff were competent and the ferries were comfortable.

I think their compass phrase of "we will manage our business prudently. we will take on debt selectively. we will not over- build. we will invest sensibly" should guide them well - like how emperor penguins are excellent navigators.

[Ben]

This is indeed an excellent company with good management capabilities, sitting on a good spot to ride on the recovery.

Just to share what I know about the management of the company.

The company was founded by Mr Heng Kheng Seng, who was the Chairman of Penguin until he retired in Feb 2010. Mr Heng was succeeded by Mr. Jeffrey Hing, who was a non-executive director before that and the single largest shareholders of the company. Since then, Jeffrey Hing has increased his shareholding of the company from 16% to almost 20%, a sign that he is confident of the company prospect.

I suspect they could be some other unknown reasons on Mr Heng resignation. After all, he was only 60 when he retires. Having founded the company and worked hard for 38 years to build up the company, why would he want to retire at such a young age, and hand over the company to an outsider? He even disposed off all his shares in the company, probably to Jeffrey. Why cut it so clean? I do not know the reason, but I suspect it has to do with the company future direction.
Back to Jeffrey. He is a veteran in the marine and offshore industry with more than 30 years’ experience. He owns Trinity Offshore Pte Ltd, an OSV company. With his experience in the offshore industry, he started to change the course of Penguin, building up its chartering business and disposing off its ferry ticketing business. Today, these efforts are beginning to see results.

Jeffrey is an accountant by training. Together with James Tham, the MD of Penguin since 2008, the duo are running the company now. Both are young and have the energy to steer penguin to new heights.

---

To my knowledge, Penguin only sold their retail ferry ticketing business to Batam, Bintan and Karimun. I assume Pelican Ship Management (subsidiary) still operates ferry services from Pulau Tekong to SAF Ferry Terminal back and forth. Seems like a stable revenue source. As a NSF, I noticed that the on-board staff were competent and the ferries were comfortable.

After disposing off the ferry ticketing business, the company had sold off some of its ferries. Currently, it still has 10 ferries left. 7 of the ferries are on contract to Mindef, and providing a stable recurring income. 3 are idle and waiting for opportunity to dispose off. The company made an impairment of $1.2 million in Q2 to these 3 idle ferries. Obviously, it will be a boost to its financial performance once the idle ferries are disposed off or put to use.

One more point to note. KS investments, a Keppel Company, is the second largest shareholders of Penguin, owning 6.24% of the company. Keppel is the largest offshore rig builder in the world, Penguin is the builder and charterer of OSV. It is a perfect fit.

[cif5000]

Mr Heng was succeeded by Mr. Jeffrey Hing, who was a non-executive director before that and the single largest shareholders of the company. Since then, Jeffrey Hing has increased his shareholding of the company from 16% to almost 20%, a sign that he is confident of the company prospect.

...
Back to Jeffrey. He is a veteran in the marine and offshore industry with more than 30 years’ experience. He owns Trinity Offshore Pte Ltd, an OSV company. With his experience in the offshore industry, he started to change the course of Penguin, building up its chartering business and disposing off its ferry ticketing business. Today, these efforts are beginning to see results.

Jeffrey is an accountant by training. Together with James Tham, the MD of Penguin since 2008, the duo are running the company now. Both are young and have the energy to steer penguin to new heights.

Jeffrey Hing has also big stakes in Oakwell Engineering - a very uninteresting company but is in the process of selling away its core business at a very good price. A special situation giving ~50% in 6 months!

[kelvesy]

Thanks Ben for the excellent piece of sharing on Penguin International - which I'm sure most of us appreciate it. And anyway, any rational investor would see that Penguin - with its capabilities and increasing business volume - is worth more than a meagre $0.11!

Information of Mr. Jeffrey Hing from Annual Report

"Mr. Hing is a substantial shareholder in Penguin. Prior to his appointment as chairman, he served as non-executive Director from february 2009. he was last re-elected in april 2012. Mr. Hing has more than 30 years’ experience in the marine and offshore industry, in a variety of roles ranging from finance to business development. he is the founder and managing director of trinity offshore Pte. ltd., a singapore-based owner-operator of offshore support/utility vessels. as an experienced entrepreneur in the marine and offshore industry, Mr. Hing brings to Penguin his business acumen and his global network of industry contacts. an accountant by training, Mr. Hing has served in various roles as auditor, accountant, senior executive and director of diversified corporations."

Another sentence that caught my eye

in a further affirmation of our growth strategy, our crewboat brand has now become industry vernacular, as the words “flex” and “flexes” roll off the tongues of ship brokers and ship owners alike.

It's quite interesting to note that our Singapore company is making waves around the region!

I started out my investment journey with Peter Lynch's book "One Up on Wall Street", so I tend to always look around Singapore for companies then I'll google them to check if they're listed and its fundamentals. Someone who books in and out weekly, Penguin naturally came to mind.

cif5000, may I ask, how do you check whether certain directors own shares in other companies as well? Simple detective work using Google? And wow, Sonepar Asia Pacific Limited is certainly offering them a sweet deal!