SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

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Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Equity Bottom-Up

These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.INITIATE COVERAGE
<h2>Penguin International (PBS SP)</h2>
Riding The Wave, Backed By Favourable Industry Trends
Being the world’s top builder of mid-sized aluminium crewboats and security vessels, Penguin is set to enjoy strong EPS growth of 42.9% for 2019, backed by a healthy delivery pipeline and growing demand for its new products in the fields of fire fighting and renewable energy. 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, based on 7.6x 2020F PE.
<ul>
<li>Niche shipbuilder with good track record and healthy delivery pipeline. Started in 1976, Penguin International (Penguin) builds and owns niche high-speed aluminium craft. It has delivered more than 150 aluminium workboats, patrol craft and passenger ferries around the world, including Africa, Singapore and ASEAN. 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.</li>
<li>
Growing the size and quality of profit via more new products. Already an expert in aluminium security boats and offshore oil &amp; gas (O&amp;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.
</li>
<li>Beneficiary of Nigeria’s piracy issues and low transportation costs of crewboats for O&amp;G players. 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.</li>
</ul>
<ul>
<li>On the other hand, the low oil price environment has prompted more O&amp;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 we expect it to grow 17.6% yoy in 2019.</li>
<li>
Initiate coverage with BUY and a PE-based target price of S$0.85, based on 7.6x 2020F PE, pegged to its long-term average mean. The stock is trading at 5.6x 2020F PE (3.6x ex-cash), below its long-term average of 7.6x. Penguin has a strong balance sheet, with 2Q19 net cash of S$47.9m (34.8% of market cap); its net cash has been increasing
since 2017.
</li>
</ul>

These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.INITIATE COVERAGE
Penguin International (PBS SP)
Riding The Wave, Backed By Favourable Industry Trends
Being the world’s top builder of mid-sized aluminium crewboats and security vessels, Penguin is set to enjoy strong EPS growth of 42.9% for 2019, backed by a healthy delivery pipeline and growing demand for its new products in the fields of fire fighting and renewable energy. 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, based on 7.6x 2020F PE.

Niche shipbuilder with good track record and healthy delivery pipeline.  Started in 1976, Penguin International (Penguin) builds and owns niche high-speed aluminium craft. It has delivered more than 150 aluminium workboats, patrol craft and passenger ferries around the world, including Africa, Singapore and ASEAN. 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.

Growing the size and quality of profit via more new products.  Already an expert in aluminium security boats and offshore oil &amp; gas (O&amp;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.

Beneficiary of Nigeria’s piracy issues and low transportation costs of crewboats for O&amp;G players. 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&amp;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 we expect it to grow 17.6% yoy in 2019.

Initiate coverage with BUY and a PE-based target price of S$0.85, based on 7.6x 2020F PE, pegged to its long-term average mean. The stock is trading at 5.6x 2020F PE (3.6x ex-cash), below its long-term average of 7.6x. Penguin has a strong balance sheet, with 2Q19 net cash of S$47.9m (34.8% of market cap); its net cash has been increasing
since 2017.



Non-SGX Report: Penguin International (PBS SP): Riding The Wave, Backed By Favourable Industry Trends

Singapore

Penguin International Limited operates as an integrated marine and offshore services company. The Company specializes in design, construction, and operation of high-speed aluminum ships. Penguin International owns and operates a fleet of vessels as well as aluminum shipbuilding yards. Penguin International serves customers worldwide.

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Non-SGX Report: Penguin International (PBS SP): Riding The Wave, Backed By Favourable Industry Trends

These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external contributors. Please...

Singapore Exchange Ltd (SGX)