Based on the latest 1H financial report, the inventories is growing, means the shipbuilding output is growing. Current production is approaching full-cap, thus an expansion of yard is expected.
http://infopub.sgx.com/FileOpen/Expansio...eID=364212
New batam yard, is 50% larger than old batam yard. It should be sufficient for years to come. The management remains focus with its long-term plan, amid the current market condition, is remarkable, IMO.
The gross margin recovered. It is due to higher margin of ship-repair activities. The last Q was pull-downed by lower margin of chartering biz, based on the report.
(vested, and will remain vested)
[quote='dydx' pid='117827' dateline='1439299226']
2Q result just out.....
http://infopub.sgx.com/FileOpen/CFGL-3QF...eID=364324
Assuming the entire $11.754m under Other Operating Income is attributable to a gain from the out-of-court settlement of a legal case with Wartsila Ship Design Norway AS, Penguin's adjusted PBT accruable to its normal operating activities would be $1.069m. It appears that Penguin has conservatively assumed that the gain would be taxable. If we add back the $2.45m under depreciation of PPE and amortisation of deferred drydocking expenditure, Penguin generated a pretax FCF of $3.519m from operating activities in 2Q.
i think the legal fee incurred for winning the $11m+ settlement should be $1m+(this is included in the Admin Expenses which is $1m more that 2Q2014), so this $1m should be added back to Operating PTB.
Just glanced through the 2Q15 results and have a few points of concern.
1) The increase in inventories resulting in negative OCF, is most likely caused by customers requesting for delays in vessel delivery.
2) The fleet/yard expansion being undertaken. While one way to look at it is that it shows that the management is confident in the future prospects of the business, it also enables management to obscure margins by capitalising some of the staff costs into PPE.
3) The lack of explanations by the management for the decision to increase investment in the business in such a uncertain market, instead of working to conserve cash which is the most logical path to take. With shipbuiliding revenue down significantly and the group's fleet most likely underutilised as it is, this is a perplexing decision in my view and management should have put in some form of explanation for the decisions.
(11-08-2015, 11:51 PM)Clement Wrote: [ -> ]Just glanced through the 2Q15 results and have a few points of concern.
1) The increase in inventories resulting in negative OCF, is most likely caused by customers requesting for delays in vessel delivery.
2) The fleet/yard expansion being undertaken. While one way to look at it is that it shows that the management is confident in the future prospects of the business, it also enables management to obscure margins by capitalising some of the staff costs into PPE.
3) The lack of explanations by the management for the decision to increase investment in the business in such a uncertain market, instead of working to conserve cash which is the most logical path to take. With shipbuiliding revenue down significantly and the group's fleet most likely underutilised as it is, this is a perplexing decision in my view and management should have put in some form of explanation for the decisions.
Astute observations.
Penguin daily volume still quite high, still some traders and sellers around, so believe not time to jump in yet. After all, share price has halved in value since it's highs and in less than a year! back to 10cents could be likely if the oil price does not recover.
overinvestment in yard and decrease in orders will be double whammy on this company. Saving grace is the cash which will probably help the company through this tough times without resorting to capital raisings.
Agree with Clement's analysis that Penguin has been stacking its orders in yards. This is possibly request from customers to delay delivery of orders.
The second thing i really have grips with is its PPE. In the second quarter, Penguin added another round of PPE. While ppl may point to the reason where some of the PPE in its 2Q is a result of land acqusition for Batam Yard, I do not think its entirely true. Some evidence points to the fact that in Q2, one of the vessels it built was Pelician, this means an internal addition to the fleet. the 12 Mil addition in q2 may signal penguin added at least 2 more to its under utilized charter fleet. If we see another round of 12m addition of ppe in q3,it will strengthen my conviction that in q2; penguin added another year's worth of PPE in Q2, probably to maintain yard utilization.
Penguin is really playing it tough here by adding more to its fleet to prepare for the upturn. It is is indeed lucky to have a prudent mgmt who had conserved cash previously during the upturn. However, to take up term loan now, expand PPE and add ships is a bit risky.
I have removed a post, with a link to TA of the company. Let's refrain from TA post, and focus on only FA.
Regards
Moderator
Its just like Jaya before GFC just that the vessels are different...
Speculative builds and adding to fleet is part of taking a view. Right view right cycle boom town... otherwise will be jelek... its worst than trading in financial markets as it requires capex and lacks liquidity...
(12-08-2015, 09:12 AM)CY09 Wrote: [ -> ]Agree with Clement's analysis that Penguin has been stacking its orders in yards. This is possibly request from customers to delay delivery of orders.
The second thing i really have grips with is its PPE. In the second quarter, Penguin added another round of PPE. While ppl may point to the reason where some of the PPE in its 2Q is a result of land acqusition for Batam Yard, I do not think its entirely true. Some evidence points to the fact that in Q2, one of the vessels it built was Pelician, this means an internal addition to the fleet. the 12 Mil addition in q2 may signal penguin added at least 2 more to its under utilized charter fleet. If we see another round of 12m addition of ppe in q3,it will strengthen my conviction that in q2; penguin added another year's worth of PPE in Q2, probably to maintain yard utilization.
Penguin is really playing it tough here by adding more to its fleet to prepare for the upturn. It is is indeed lucky to have a prudent mgmt who had conserved cash previously during the upturn. However, to take up term loan now, expand PPE and add ships is a bit risky.
The problem with this counter is the buy vol is very low. It has dropped quite steeply for past 2 weeks. Those who have bought at higher levels and considering cutting loss will suffer a lot. At current price, I thought the price is reasonable. Of cos it might drop to 10cts level judging from the pp queueing to sell either cutting losses or some shortist at work.
I was wondering the land purchase to expand their operations, was that planned many months before the oil prices melt down? And they decided to think long term and so suck thumb and go ahead with the planned purchase? MTQ was one who foresee the trend wrongly imo. Boustead is shrewed in this aspect but I am waiting till 70 to 80cts level
. My only concern is CEO Wong is retiring.
(11-08-2015, 11:51 PM)Clement Wrote: [ -> ]Just glanced through the 2Q15 results and have a few points of concern.
1) The increase in inventories resulting in negative OCF, is most likely caused by customers requesting for delays in vessel delivery.
2) The fleet/yard expansion being undertaken. While one way to look at it is that it shows that the management is confident in the future prospects of the business, it also enables management to obscure margins by capitalising some of the staff costs into PPE.
3) The lack of explanations by the management for the decision to increase investment in the business in such a uncertain market, instead of working to conserve cash which is the most logical path to take. With shipbuiliding revenue down significantly and the group's fleet most likely underutilised as it is, this is a perplexing decision in my view and management should have put in some form of explanation for the decisions.
The new yard, is very suitable and preferred. It is an undeveloped island, and with direct 600m away from existing Batam yard. I reckon it is a cheap, and good deal to the company. There are two part of the investment, the land cost, and infra. The company should have room to regulate the capex, in phases, in order not to overly deplete the cash reserve un-necessary.
The current slowness in biz, isn't structural, but normal biz cycle. I will very disappoint, if the company avoid necessary investment, amid a biz down-cycle. Having said so, I agree the company shouldn't over-depleted the cash reserve to jeopardize company survival amid the storm.
(vested)