Nigeria’s piracy riddled waterways are providing good news for at least one company, say analysts at Singapore’s UOB Kay Hian.
The finance house has just initiated coverage of small boat builder Penguin International with a ‘buy’ recommendation.
“Nigeria, Penguin’s main market with around 40% revenue contribution, has been plagued by piracy off its coastal waters,” said analyst Llelleythan Tan.
“It has been consistently in the top two with regards 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.”
UOB Kay Hian says the low oil price environment has prompted more oil and gas 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% year-on-year in 2018 and we expect it to grow 17.6% year-on-year in 2019,” said Tan.
The analyst said Penguin has also started to expand its product portfolio to include fire fighting ships, windfarm vessels and passenger ferries.
“Penguin delivered several of these vessels in the first half of this year and is poised to secure more build-to-order contracts for new products in the future,” said Tan.
UOB Kay Hian has a target price for Penguin’s shares of SGD 0.85 (62 US cents), which represents potential gain of over 35% from its current share price.
“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,” said Tan.
“It has been gaining market share in Singapore from competitors that exited the market.
“With a healthy delivery of about 30 vessels for 2019 versus 15 vessels for 2018, we expect 2019 and 2020 EPS to grow 42.9% and 26.8% year-on-year respectively.”
