Previous day closing price: $0.45
Recommendation: Buy (maintained)
Target price: $ (maintained)
ASL Marine posted a 2Q net profit of $16.3m, up a steady 10.6% over 2Q08, and against revenue growth of 7.7%. The margin improvement came from the shipchartering business, where management has indicated that rates have stayed firm.
Segmentally, shipbuilding and charter turnover were maintained at a steady level sequentially, as shipbuilding continues to convert on its orderbook of S$663m, and utilisation of charter vessels remains high. Shipbuilding margins were maintained at 9.8%, while shipchartering saw gross margins improve to 35.6% due to a firming up of charter rates. However, shiprepair saw a sequential decline in turnover due to recognition timing, but margins remained very healthy at 32.1%.
For shipbuilding, ASL will be recognising approximately S$172m worth of revenue in 2H09. However, it has not received any new orders recently, which is in line with the cautious outlook for shipowners in the current economic climate. However, ASL so far has had no issues with the usual worries currently plaguing the industry: it has not seen any order cancellations nor has any of its customers approached it for re-negotiation or delayed delivery. The overwhelming majority of its orderbook has already secured financing as well.
ASL has advised that its shiprepair business remains healthy, with a high level of enquiries. However, ASL is bracing for potential slowdowns through lower contracts and/or lower scopes of work, which it believes is inevitable. For now, the repair of specialised offshore vessels in particular remains in demand, and ASL will continue to capitalise on this. Its Batam yard expansion is also proceeding on track.
Our FY09 net profit of $72.2m is maintained, as is core net profit at S$60.2m, which excludes an S$11.3m one-off gain in 1Q09. Our target price of S$1.62 still stands, based on 8x core FY09 earnings. This implies significant upside for an undervalued stock, trading at just 2.3x core PER and a Price to Book of just 0.5x.
Showing posts with label Shipping. Show all posts
Showing posts with label Shipping. Show all posts
Thursday, February 12, 2009
Tuesday, February 10, 2009
Shipping trusts at a glance
| Rickmers Maritime | Pacific Shipping Trust | First Ship Lease Trust | |
| IPO | 2007 | 2006 | 2007 |
| Sponsor | Rickmers | Group Pacific Intl Lines | Schoeller Holdings/ HSH Nordbank AG/Bayerische Hypo-und Vereinsbank |
| Sponsor role | Acquisition pipeline, ship management | Acquisition pipeline, ship management, customer | Customer, ship management if needed |
| Sub-segment focus (as of today) | Containerships | Containerships | None. Owns containerships, dry bulk carriers and tankers |
| Charter type | Time charters | Bareboat & time charters | Bareboat charters |
| Charter duration | 7 - 10 yrs | 5 - 10 yrs | 7 - 12 yrs |
| Leases include vessel purchase option | No | No | Yes (end of lease/early buy-out) |
| Leases include early termination option | Yes (one) | No | Yes (most) |
| Customers | Maersk, CMA CGM, Hanjin Shipping, Evergreen, Mitsui O.S.K Lines | Pacific Intl Lines, CSAV | Evergreen, Geden, Groda Shipping, James Fisher, PT Berlian Laju, Schoeller Holdings, Siba Ships |
| Distributions | USD/quarterly | USD/quarterly | USD/quarterly |
| Pay out policy | Fixed DPU amount | 90% of cash earnings after debt repayment (~about 50% of cash income) | New quarterly guidance for payout: 75-80% of cash income for 1Q09 (100% previously) |
| Cash earnings retained | Yes | Yes | Yes (from 1Q09 onwards) |
| Growth plans | US$1.1b of acquisitions contracted over 2009-2010 | No explicit target set for 2009 (prev: US$200m p.a.) | No explicit target set for 2009 (prev: US$300m p.a.) |
| Debt repayment | No (not immediately) | Yes (immediately amortizing) | No (bullet repayment) except for latest loan. Intends to repay debt with retained cash from 1Q09. |
Source: OCBC, 10 Feb 2009
Rickmers Maritime: Deadlocked by order book
Previous Day Closing price: $0.395
Recommendation: Hold (maintained)
Target price: $0.40
Rickmers Maritime (RMT) posted a 11.4% QoQ increase in 4Q08 revenue to US$29.6m. The results met our expectations except for a surprise US$3.5m non-cash provision for vessel impairment on Maersk Djibouti (about 5.5% of FY09F revenue). It is the trust's only vessel at risk for early lease termination, from February 2010 onwards, per its charter terms. As a result, net profit fell 25.7% QoQ to US$7.2m. RMT will pay out 2.25 US cents for the quarter, flat QoQ and up 5.1% YoY. This translates to an annualized yield of 34% and a distribution payout of 63%. The manager said that given current conditions, it would not provide any guidance on FY09 DPU.
RMT's gearing has increased from 1.1x debt-toequity at 30 September to 1.5x as at 31 December. In January, RMT took delivery of its 14th vessel, MOL Destiny for US$72m. Including the January vessel, RMT is contracted to acquire US$1.1b worth of containerships over the next two years. RMT has credit facilities in place to fund the FY09 vessels costing US$420m in all. If the FY09 buys are fully debt-funded, we estimate RMT's gearing will hit an unsustainable 2.7x on existing equity levels by year end.
Assuming the existing facilities are fully utilized, we estimate RMT would need to repay around US$17.9m of debt in FY09 and another US$157m in FY10. Additionally, RMT has yet to arrange funding for the US$711.6m vessels due in FY10. We believe the market value of those vessels would have taken a hit versus the asset cost pre-fixed by RMT. So even if lenders provide 100% loan-to-market value, it would not cover the cost of the vessel. The time for a fresh equity issue is fast approaching. An equity issue in FY09 itself is, in our opinion, necessary to strengthen RMT's negotiating position with lenders.
Source: OCBC, 10 Feb 2009
Recommendation: Hold (maintained)
Target price: $0.40
Rickmers Maritime (RMT) posted a 11.4% QoQ increase in 4Q08 revenue to US$29.6m. The results met our expectations except for a surprise US$3.5m non-cash provision for vessel impairment on Maersk Djibouti (about 5.5% of FY09F revenue). It is the trust's only vessel at risk for early lease termination, from February 2010 onwards, per its charter terms. As a result, net profit fell 25.7% QoQ to US$7.2m. RMT will pay out 2.25 US cents for the quarter, flat QoQ and up 5.1% YoY. This translates to an annualized yield of 34% and a distribution payout of 63%. The manager said that given current conditions, it would not provide any guidance on FY09 DPU.
RMT's gearing has increased from 1.1x debt-toequity at 30 September to 1.5x as at 31 December. In January, RMT took delivery of its 14th vessel, MOL Destiny for US$72m. Including the January vessel, RMT is contracted to acquire US$1.1b worth of containerships over the next two years. RMT has credit facilities in place to fund the FY09 vessels costing US$420m in all. If the FY09 buys are fully debt-funded, we estimate RMT's gearing will hit an unsustainable 2.7x on existing equity levels by year end.
Assuming the existing facilities are fully utilized, we estimate RMT would need to repay around US$17.9m of debt in FY09 and another US$157m in FY10. Additionally, RMT has yet to arrange funding for the US$711.6m vessels due in FY10. We believe the market value of those vessels would have taken a hit versus the asset cost pre-fixed by RMT. So even if lenders provide 100% loan-to-market value, it would not cover the cost of the vessel. The time for a fresh equity issue is fast approaching. An equity issue in FY09 itself is, in our opinion, necessary to strengthen RMT's negotiating position with lenders.
Source: OCBC, 10 Feb 2009
Rickmers Maritime: Financing remains key
Previous Day Closing price: $0.40 (STI: 1,682.34)
Recommendation: Hold (maintained)
Price Target : 12-Month S$ 0.40 (Prev S$ 0.63)
Rickmers Maritime did not surprise and maintained its quarterly DPU payout of 2.25 UScts, in line with steady operating performance. We believe the payout can be sustained in FY09. However, RMT still needs to find a solution to its committed FY10 capex needs of US$711m. In addition, near term refinancing needs include a US$130m bullet repayment due in 1H10. With spot charter rates currently hovering around 50-60% below contracted long term charter rates, the risk of renegotiations cannot be ruled out either. Hence, we maintain HOLD at a reduced target price of S$0.40.
In a prudent move, RMT took a US$3.5m impairment charge on the Maersk Djibouti vessel to account for the risk that Maersk may exercise the early termination option by Feb’10. No other vessel has this clause, however.
Data from Clarksons Research indicates that newbuilding prices for similar vessels as those on RMT’s orderbook may have fallen 10-12%. We estimate one of the loan tranches, a US$288m facility financing the 5 Mitsui ships, may be at risk of technical default.
RMT will add 5 vessels to its portfolio this year, fully financed by existing credit lines. This should ensure enough cash flows in FY09 for RMT to maintain the 2.25 UScts quarterly payout, even while conserving cash. However, with financing uncertainties looming, dividend visibility may be clouded beyond that. In our forecast numbers alongside, we assume a 60% debt-funded potentially dilutive acquisition scenario. But our target price of S$0.40 is derived as the average of fair values under 3 probable scenarios – I) as described above, ii) non-realization of above acquisition and cash flows accruing only from portfolio as of end-FY09 and iii) inability to conclude near-term refinancing deals.
Source: DBS, 10 Feb 2009
Recommendation: Hold (maintained)
Price Target : 12-Month S$ 0.40 (Prev S$ 0.63)
Rickmers Maritime did not surprise and maintained its quarterly DPU payout of 2.25 UScts, in line with steady operating performance. We believe the payout can be sustained in FY09. However, RMT still needs to find a solution to its committed FY10 capex needs of US$711m. In addition, near term refinancing needs include a US$130m bullet repayment due in 1H10. With spot charter rates currently hovering around 50-60% below contracted long term charter rates, the risk of renegotiations cannot be ruled out either. Hence, we maintain HOLD at a reduced target price of S$0.40.
In a prudent move, RMT took a US$3.5m impairment charge on the Maersk Djibouti vessel to account for the risk that Maersk may exercise the early termination option by Feb’10. No other vessel has this clause, however.
Data from Clarksons Research indicates that newbuilding prices for similar vessels as those on RMT’s orderbook may have fallen 10-12%. We estimate one of the loan tranches, a US$288m facility financing the 5 Mitsui ships, may be at risk of technical default.
RMT will add 5 vessels to its portfolio this year, fully financed by existing credit lines. This should ensure enough cash flows in FY09 for RMT to maintain the 2.25 UScts quarterly payout, even while conserving cash. However, with financing uncertainties looming, dividend visibility may be clouded beyond that. In our forecast numbers alongside, we assume a 60% debt-funded potentially dilutive acquisition scenario. But our target price of S$0.40 is derived as the average of fair values under 3 probable scenarios – I) as described above, ii) non-realization of above acquisition and cash flows accruing only from portfolio as of end-FY09 and iii) inability to conclude near-term refinancing deals.
Source: DBS, 10 Feb 2009
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