October 9, 2019

Penguin’s strong balance sheet, unique business model and niche expertise have helped it to weather tough times such as the oil crisis in 2015-16. It has been gaining market share in Singapore from competitors that exited the market. With a healthy delivery of about 30 vessels for 2019 vs 15 vessels for 2018, we expect 2019 and 2020 EPS to grow 42.9% and 26.8% yoy respectively.

Nigeria, Penguin’s main market with around 40% revenue contribution, has been plagued by piracy off its coastal waters. According to the International Maritime Bureau, Nigeria has been consistently in the top two in regard to the frequency of piracy attacks. Penguin’s Flex Fighters provide Nigerian boat owners with the speed and armour they need to combat these pirates.

On the other hand, the low oil price environment has prompted more O&G companies to adopt high-speed crewboats as the main mode of offshore transportation, instead of helicopters, between oil rigs. Penguin’s chartering revenue grew 17.5% yoy in 2018 and is expected to grow 17.6% yoy in 2019.

Already an expert in aluminium security boats and offshore oil & gas (O&G) crewboats, Penguin has started to expand its product portfoilio to include fire fighting ships, windfarm vessels and passenger ferries. Penguin delivered several of these vessels in 1H19 and is poised to secure more build-to-order contracts for new products in the future.

Penguin should continue to benefit from Nigeria’s piracy issues and the low transportation costs of offshore crewboats. Initiate coverage with a BUY and a target price of S$0.85. – UOB Kay Hian

Closing Price: S$0.64