Towards Sustainable Profits The moment you have all been waiting for is finally here: Penguin International is back in the black. In FY2006, our company posted a net profit of $1.2 million, versus a net loss of $3.8 million the previous year.
As a gesture of appreciation to our loyal shareholders, the board has recommended a token dividend to be paid out from our profits. In the near future, we hope to find more innovative ways of unlocking the value of our businesses to the benefit of our shareholders.
After two years of restructuring and refocusing our business, we are now on an even keel, sailing on a wave of sustainable profits. My confidence in the future of this company rests on one simple fact: Penguin is no longer just a regional ferry operator. The Penguin you see before you today is a professionally-run global marine and offshore services company, specialising in the construction and operation of both aluminium and steel vessels that serve the commercial transportation and offshore industries.
Since the start of FY2006, we have acquired our first Anchor Handling Towing and Supply vessel (AHTS), which is currently on a long-term charter; we have signed a US$23 million contract to build steel Fast Supply Intervention Vessels (FSIV) for a Middle East client; we have successfully marketed our in-house crewboat design to third-party shipowners; and we have formed strategic ferry partnership with major operators, both at home and abroad.
Vote of Confidence from the Market While believing in oneself is a virtue, I am not counting on this conviction alone to see the company through the coming years. My belief in Penguin is backed by a strong vote of confidence from none other than you, our valued shareholders. Over the past year, Penguin’s share price has risen amidst strong trading activity, signaling a growing interest in our company.
The strongest vote of confidence was cast by D.B. Zwirn (D.B.Z.), a New York-based Alternative Investments Manager and Merchant Capital Provider with over US$4.5 billion worth of assets under management.
With D.B.Z., we structured a $30-million convertible bond that enabled us to draw down on the cash as and when we needed it, without having to pay any interest or bind ourselves to restrictive covenants. This means no negative pledge, no restrictions on future equity raisings and no subordination of existing financing facilities.
Now, why would a major New York fund agree to provide a financing facility with such flexible terms to Penguin when there are larger, more profitable and sexier marine counters out there? The answer is simple: D.B.Z. believes in the commitment and the capability of our management; they believe in our turnaround story.
I hereby thank D.B.Z. and you, my fellow shareholders, for your belief and support in our management and staff.
Maximising Our Listco Benefits Beyond fund raising, the convertible bond program also represents a new mindset in Penguin: We want to make full use of our status as a listed company. By this, I mean we want to tap the debt and equity markets creatively and responsibly to raise funds for our expansion, increase our market capitalisation and get into high-level deal flows.
In truth, since going public in October 1997, Penguin has been simply existing - rather than thriving - as a
Listco. Apart from following regulations and guidelines, we did little else to capitalise on our status as a listed company - a privilege that we continue to pay for. In many ways, Penguin was a compliant public company with the soul of an underachieving private firm.
But all that changed in October 2005 when our warrant holders converted over 80% of our listed warrants into shares at a conversion price of $0.15 each. That liquidity enhancing event was the first time we benefited from our Listco status since our IPO eight years earlier.
The recent $30 million convertible bond program - which is undoubtedly a more sophisticated financial product than a warrant issue - further enhances our Listco status. Today, Penguin is no longer a Listco eking a market existence. We are a Listco that appreciates who we are and knows how to capitalise on our listing to enhance shareholder value.
Growth by Sensible Acquisitions and Partnerships Now that Penguin is back on an even keel, we are keen to pursue a more pro-active growth strategy, which includes mergers and acquisitions, as well as cross-border joint ventures.
With a rising share price, access to cash and additional financing, an honest and capable management, not to mention 31 years of experience in the marine and offshore industry, Penguin aims to be the partner of choice among like-minded companies looking for a long-term partner for growth.
In FY2006, we sowed the seeds of such partnerships. On the ferry front, we signed a time charter with Tian San Shipping to jointly provide high-speed passenger ferries to the local petrochemical industry. We also signed a bareboat charter with the Philippines’ Aboitiz group for three of our ferries.
On the corporate front, we acquired a small industrial services company specialising in the provision of
industrial scaffolding services to the petroleum, power, petrochemical and pharmaceutical industries.
New Logo for Crossing Generations In our last annual report, I wrote that I was grateful to be able to continue to contribute to the growth of Penguin on a daily basis. That said, I welcome new ideas from my staff and management led by our Managing Director, Alex Yong. To the hardworking employees of Penguin, I salute you for your loyalty, commitment and trust.
In March this year, we organised a Dinner and Dance party themed “Crossing Generations” to thank all our
employees for their loyal support. During the event, we unveiled our new logo featuring a “leaner and meaner”
Penguin surging through the waves, which symbolises the relentless spirit of our new management team.
The logo change - our first in a decade - also represents the formalisation of Penguin’s leadership succession and our company renewal, and paves the way for a bright new future for Penguin.
Against all that is new in Penguin, our core values of honour, honesty and fairness will always remain unchanged.
Here’s wishing all of you health and wealth in the coming year.
Warmest Regards, Mr. Heng Kheng Seng
Founder & Executive Chairman
