Rickmers – UOBKH
4Q07 Distributions in line with management guidance
Rickmers Maritime (RMT) announced net profit of US$20.6m for FY07. This was 25% higher than what we had forecasted due mainly to higher negative goodwill on business combination and amortization of unfavourable charter rates (US$9.148m vs. US$6.116m) than what we had provided for. Bear in mind that these two items are accounting items and non-cash items and have no impact on distributable cash. Charter income for the period was about 1.2% higher than our forecasts mainly due to early delivery of two vessels in Dec 2007.
Distributable Cash Per Unit higher on early vessel deliveries. Distributable Cash Per Unit (DCPU) for the period came in at 6.5 US cents about 2% higher than what we had forecasted. This can be attributable to slightly higher charter income due to the early delivery of two vessels in December 2007. Distribution Per Unit (DPU) announced for FY07 was 5.64 US cents, in line with management’s guidance, but slightly lower than our expectations of 5.77 US cents as management has retained a larger portion for future acquisitions. For 4Q07, DPU paid will be 2.14 US cents and will be paid out on 27 March 2008. RMT units will trade ex-Distribution on 12 March 2008.
Maintain BUY: Target price unchanged at US$1.19 (S$1.68). We believe that the sell down in RMT’s shares is unjustified given the defensive nature of the earnings and distributions, due to its vessels being chartered out on long term fixed timecharters, with an average duration of nine years. Furthermore, RMT focuses on only the top liner companies in the world and its customers include Maersk Lines, CMA CGM, Italia Marittima, Hanjin Shipping and Mitsuit O.S.K. Lines. The shipping trusts in the US have rebounded following the fall in global equities in Nov 07 and are currently trading at distributions yields of about 6.0 to 6.5%. RMT is currently trading at an attractive distribution yield of 12.2%. We reiterate our BUY recommendation on RMT, with a target price of US$1.19 (S$1.68).