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By DBSVO
DPU cut overshadows healthy operations. While we had
highlighted the possibility of more DPU cuts from RMT in our
earlier note, the quantum of the DPU cut – by 72% from
2.14UScts in 1Q09 to 0.60UScts in 2Q09 – took us by
surprise. As did the fact that management did not provide
any concrete guidance on the usage of the cash retained.
Distributable income, however, surged 18% q-o-q to
US$19.9m, riding on a 15% increase in revenue to
US$37.5m. Net profit of US$5.2m was affected by US$7.5m
provision on the Maersk Djibouti, which is up for redelivery
in Feb-2010 and is currently lying idle.
String of woes still pending resolution. Like other
shipping trusts, RMT is currently negotiating a waiver on its
loan-to-value covenants. However, unlike peer FSLT (BUY, TP
S$0.71), no indicative timeline for conclusion of talks has
been provided. The more pressing worry for investors,
though, is the refinancing of its US$130m bullet loan due in
April’10 – which has been highlighted by the Trust’s auditors
as a risk to its going concern assumptions.
Cash retention – how much is enough? While the Trust
has resolved some immediate cash flow problems by
deferring up to US$20m deposit payments due in 2H09 for
the vessels on order, we believe it may even have to suspend
distributions over a few quarters to resolve its refinancing
woes – similar to what US-listed peer Danaos Corp has done
since early’09. We believe this DPU cut and the perceived
lack of clarity on negotiations with various stakeholders
should weigh heavy on investors’ minds and downgrade the
stock to SELL at a reduced TP of S$0.40 (FY09-10 DPU
estimates cut by 54-60%). Downward pressure on share
price will also make equity fundraising (which is inevitable if
it honours its order commitments) more difficult.
Well...
There is high opportunity cost associated with this stock now..
All REITS and Shipping Trust also below their NAV now...
May as well cut loss and move money to other better dividend stock and revisit this later in March 2010 when their ability to repay the debts in Aprl 2010 becomes more visible...
Going forward, there are only 3 things they can do:
1) Re-finance the debts by securing loans from banks...
2) Issue Rights...
3) Cut % payout to preserve cash...
Now they are doing #3.... But #2 will most probably depress price further and dilute shareholding and lower DPU...
#1 is a bit hard to achieve as fundings are expensive now...
Somemore today mkt RED !!!!
I think the analyst TP is correct...
This counter Dividend Yield is now only 6% pa...
FSL = 15% pa
Pac Ship = 16% pa
This counter will fall this its existing % yield is comparable to its peers at least..
Giving a conservative yield % of 15%...
My TP is abt SG$ 0.25 ...
jeremyow ( Date: 17-Aug-2009 10:33) Posted:
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good point jeremy, but we don't know what is going to happend in future, Rickmers has not given any guidance. Their website is still showing yield of 28%. What if they permanently give such a low dpu. I wish their management will give a statement to allay investors fears.
How much more of the future dpu will they have to retain in order to fully refinance their debt. There should be more transparency.
jeremyow ( Date: 17-Aug-2009 10:33) Posted:
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Herd mentality.......panic selling.........People mostly get ruled by emotions when buying or selling. They act as though thinking the company is going to close down when in fact Rickmers has had a recent good quarter of financial earnings and revenue. It is just that it is conserving cash by giving out lesser distributions. So, to the courageous ones who refuse to agree with the crowd to sell, they will instead buy upon such rare opportunity when prices maybe temporarily depressed.
Somemore, if one has bought at substantially lower than Rickmers's NAV per unit, even if the company close down (which I think is unlikely), one may not lose his capital totally since he may get back some cash after the company liquidates it's assets and pays off it's debts, and still has cash left over to return to it's shareholders. Only those that bought at higher unit prices (above the NAV per unit) has cause for concern because they paid too high price (lock in too much capital) to own the units of this company.
<By not agreeing with the crowd, one is neither right nor wrong. Only the company's future prospects will prove itself.>
<Think of the worst consequence that can befall oneself before selling shares or units of a company. Do not be impulsive to always react based on just one or two difficult quarters in earnings or paying out dividends the company is facing. Always think long term in terms of the company's future business prospects when dealing with their units or shares.>
matthewsoh ( Date: 17-Aug-2009 09:07) Posted:
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From Citi
Concerns remain - We maintain our Sell/Speculative Risk (3S) rating on Rickmers Maritime (RM). RM's 2Q09 operational results were largely in-line. During the conference call, much attention was focused on measures being taken to address the trust's outstanding issues - we provide a summary of our views below:
2Q09 DPU US˘0.6 - This is lower than consensus DPU expectation of US˘1.5, and translates to an annualized yield of 5.9% based on current price (vs. competitor shipping trusts at 11%-16% consensus FY10E yield). No guidance on future DPU was provided; RM's board will review DPU policy every quarter.
Share de-rating may follow - We believe RM's share price may de-rate given the low 2Q09 DPU payout and lack of dividend guidance. This may, in turn, make any potential equity raising prohibitively expensive, and more than offset the benefits from the ~US$7mn/qtr additional cash retention achieved from the DPU cut.
Sponsor support not material - Rickmers Group will: 1) defer receiving its share of 2Q09 DPU amounting to US$0.8mn out of the US$2.5mn; 2) allow RM to postpone deposit payment of US$20mn for two ships due for delivery in 2010. We view these measures as symbolic but insignificant given that the cash retention amount is small.
Auditor's "emphasis of matter" - PwC highlighted the "existence of a material uncertainty that may cast significant doubt on the Group's ability to continue as a going concern", noting that RM's ~US$130mn loan maturing in Apr-2010 has yet to be refinanced and that it is also in talks with banks on its LTV covenants.
Update on other matters - 1) Recognized US$7.5mn impairment loss in 2Q09 (on top of US$3.5mn in 1Q09) on a vessel which has charter expiring in Feb-2010; 2) RM still exploring avenues to plug the funding gap of US$712mn for its 4 x 13,100 TEU containerships due for delivery in Jul-Sep 2010; 3) Has appointed an independent financial advisor and investment bankers "to provide advisory services to assist in resolving the issues currently faced by the Trust".
nstcsg ( Date: 17-Aug-2009 10:20) Posted:
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Like you, this was my first 'real' i.e. substantial investment on shipping trust. Had intended to keep it for long term. My confidence in the company management was totally shaken with their Friday announcement. Seems like the company is in self-preservation mode now. The cut in DPU is simply too drastic.
I agreed with what nickyng said: FSL is better as it gave investors guidance of its next DPU. RM just dropped a bombshell. And today this is how market reacted.
I have bitten the bullet and jumped ship. The money can be better invested elsewhere.
Well, it's not all loss for me. I gained a major lesson learnt. Take it as school fee. Must open eyes bigger to survive.. cheers.
MsAloevera ( Date: 17-Aug-2009 09:30) Posted:
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sureesh40 ( Date: 17-Aug-2009 09:47) Posted:
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Ya seems abit overdo. Seem like the counter jus XD.
Real XD time than another down, abit dangerous leh.
sureesh40 ( Date: 17-Aug-2009 09:47) Posted:
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I think Rickmer drop bc of analyst SELL call:
Rickmers Maritime: DPU slashed; LTV waiver negotiations continue
Summary: Rickmers Maritime (RMT)’s 2Q09 results were in line with expectations, barring a US$7.5m provision for impairment on a vessel at risk for redelivery next year. The auditor issued an emphasis of matter, citing material uncertainty that “may cast doubt on the [trust’s] ability to continue as a going concern”. 2Q DPU is 0.6 US cents per unit, down 73% YoY and 72% QoQ. Increasing cash retention may serve as an important good-faith gesture to RMT’s lenders. Discussions with lenders on loan-to-value covenant waivers are still ongoing. RMT is also negotiating refinancing for a US$130m facility maturing in April. It is also in discussions with all stakeholders regarding the as-yet unfunded Maersk vessels due in 2010 that will cost it US$711.6m. We do not expect a big upward revision in DPU until at least some of these issues are resolved. In our opinion, the current unit price does not adequately reflect the risks associated with investing in RMT. Maintain SELL with S$0.39 fair value. (Meenal Kumar)
well...tt's quite possible..comparing richmer and FSL...the rickmer mgt has not really been quite "honest" in give forward warning as transparent as FSL...so of the 2..i would rather throw my $$ at FSL ... :P
MsAloevera ( Date: 17-Aug-2009 09:24) Posted:
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lawcheemeng ( Date: 17-Aug-2009 09:17) Posted:
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matthewsoh ( Date: 17-Aug-2009 09:04) Posted:
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