Rickmers – OCBC

Continues strong performance in 2Q

Good 2Q results. Rickmers Maritime (RMT) posted a good set of 2Q results, recording US$23.7m in revenue, up 6% QoQ. The results were broadly in line with our estimates. Unitholders will receive DPU of 2.25 US cents from this quarter onwards, up 5.1% from the previous 2.14 US cents payout. RMT did well on a QoQ basis with revenue rising 6% over 1Q and net profit increasing to US$9.2m, up 9.7% QoQ. The improvement was primarily because of about 20 days’ contribution from MOL Dominance, which was delivered in early June. The 4250-TEU containership costing US$72m was the first of 13 vessels that RMT is contracted to acquire over FY08-10.

2H will be acquisition heavy. RMT is buying a total of five Mitsui vessels – the remaining four, costing US$288m, are slated for delivery over 2H08. Full impact of the first vessel and contributions from the remaining four should increase 2H revenue, which makes up 56.1% of our full-year estimate. We note that per the unitholders’ circular dated April 2008, the second Mitsui vessel – newbuild MOL Dedication – was slated for delivery on 30 July. However, there have been delays at China’s Dalian shipyard and RMT now expects the vessel in end August (with no penalties charged by Mitsui). We have revised our 3Q estimates downwards – FY08F charter revenue falls by less than 1% to US$104.8m – to take into account the delayed delivery but assume the other vessels are still on track to meet the delivery dates estimated in RMT’s April circular.

Gearing is increasing. As of this quarter, RMT’s debt-to-equity ratio has increased to 0.91x from 0.77x as at the end of 1Q. RMT will spend another US$288m on the remaining four Mitsui vessels coming in over 2H; US$276m on the four vessels slated for FY09; and US$711.6m on the four megacontainerships to be delivered in FY10. On current equity levels of about US$417m, this implies a debt-to-equity of roughly 1.6x by end FY08, 2.2x by end FY09, and 3.9x by end FY10. RMT has US$608.3m in unused debt facilities, which gives it some breathing space in the near-term. We believe RMT can avoid the equity markets in 2H08, but will need to tap new equity over FY09-11 to satiate its aggressive growth plans and the repayment schedule on its debt facilities. RMT is trading at a compelling 10.8% FY08F yield; maintain BUY with S$1.22 fair value.