17-01-2014, 12:05 PM
(17-01-2014, 10:39 AM)Ben Wrote: I do not know what the utilisation rate of its chartering business is. I guess it must be encouraging enough for them wanting to expand this segment aggressively in the last 3 years. Having a fleet of in house crewboats also has one advantage, its available for sales immediately should someone come knocking on their doors, and in today’s market, vessels available for sales immediately will command a premium. As for its ferry business, there are 10 left. 7 were contracted out to Midef and 3 are laid- up.
OSV market is in an upswing stage now, due to replacement cycle for aging vessels and under order of such vessels from 2009 onwards. This probably explains why chartering rates are raising. I understand that the servicing ratio between oil rig and OSV are at a disparity now. And with oil exploration going further out and deeper into the seas, the need for bigger, faster, more sophisticated and better fuel economy OSV is becoming even more acute. These are traits we can see in its Flex crewboats.
In term of valuation, Penguin is trading at a historical PE of about 7X, and 2014 PE will be even lower with improving performance. Previous mid to high cycle valuation for OSV players is in the range of 10X – 15X. There are still lots of upside potential IMHO.
While i agree that the current valuation is not at all demanding IMO, Penguin is operating in a cyclical industry, right? So when the music stops and the industry goes through the next downcycle, what would then be the acceptable PE? 4X-5X? Would the recurrent income stream that Penguin has been building up in recent years be sustainable/resilent enough in the next downturn?
So does it mean what is cheap now will become just as cheap in the next downcycle? So investors in this type of business have to know when to exit before the music stops?
Seeking to understand more.. thanks