Broker's take: CGS-CIMB downgrades Penguin to 'hold', revises target price to S$0.65

Published Tue, Feb 16, 2021 · 03:30 PM

CGS-CIMB on Tuesday downgraded to a "hold" call on Penguin International, saying the company's failure to announce dividends for FY2020 was "below expectations". The brokerage however raised its target price from S$0.55 to S$0.65 following the company's privatisation announcement.

The group's consortium - comprising its executive chairman, managing director and a Dymon Asia fund - on Jan 21 announced a voluntary conditional cash offer at S$0.65 per share.

Analyst Cezanne See believes that most investors would be interested in the offering, which she estimates was 0.82 times price-to-book value (P/B) for FY2020.

She noted that the last offshore & marine privatisation, PACC Offshore in 2019 by the Kuok Group, was offered at S$0.215 per share, which is approximately 1 times historical P/B.

Further, Ms See revised her forecasts on the high-speed craft builder for housekeeping purposes. She lowered the projected earnings per share by 0.2 per cent for both FY2021 and FY2022 to 1.2 Singapore cents and 1.4 cents respectively, noting that Penguin has stopped or slowed some of its uncommitted build-for-stock vessels to conserve cash.

The analyst continues to like the counter, concluding that Penguin is "profitable, relatively cheap vs domestic peers and in a net cash position". The group posted net cash of S$35.3 million for the year ended Dec 31. However, Ms See warned of downside risks in lower ship sales and chartering.