CGS-CIMB Research analyst Cezzane See has downgraded Penguin International to “hold” from “add” on its potential privatisation.

“We like Penguin as it is profitable, relatively cheap vs. domestic peers and in a net cash position. As we think most eyes will be on a potential privatisation, we lift our target price to the offer price of 65 cents per share,” writes See in a Feb 15 report.

On Jan 21, a consortium formed by Penguin’s executive chairman and managing director has offered 65 cents per share to shareholders in a conditional privatisation offer.

“The offer price implies about 0.82 times FY2020 price-to-book value or P/BV (close to its historical + 1 standard deviation level),” says See.

SEE: Consortium formed by Penguin International's executive chairman and managing director offers 65 cents per share in conditional privatisation offer

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“Penguin’s net cash was around $35 million in December 2020. The last offshore & marine (O&M) privatisation was of PACC Offshore in 2019 by the Kuok Group at 21.5 cents per share or around 1 times historical P/BV,” she adds.

For the FY2020 ended December, Penguin reported earnings of $9.7 million excluding the $3.5 million it received in government grants, which stood below See’s expectations at 93% of her estimates.

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FY2020 revenue fell 12.4% y-o-y on lower chartering and shipbuilding revenue, which was “unsurprising” to See.

As the group has provided guidance on its business segments, See has decreased her earnings per share (EPS) estimates for FY2021 and FY2022 by 0.2% each.

As at 11.15am, shares in Penguin are trading flat at 65 cents, which represents a P/BV of 0.76 times and dividend yield of 1.89%, according to CGS-CIMB’s estimates.