Rickmers – DBS
No progress yet in talks with lenders
At a Glance
• 3Q09 DPU payout of 0.60UScts at par with 2Q09
• Revenue pressures mount as Hanjin vessels scheduled for delivery are delayed owing to lack of funding
• Valuations look expensive, in our opinion, compared to more stable peers (currently trading at ~9% FY10F yield)
• Maintain SELL and cut our TP to S$0.30
Comment on Results
There were no surprises, from an operational point of view, in 3Q09 results. Distributable income and revenues were quite stable on a q-o-q basis, at US$19.7m and US$38.1m, respectively. Net profit of US$9.2m included US$3.3m of MTM losses on interest rate hedges, as the market disruption clause imposed by one of its lenders during the quarter rendered the hedge ineffective.
Outlook & Recommendation
Revenue pressures are expected to mount from FY10 as charterer Maersk has tendered that it will exercise the early termination option on Maersk Djibouti and redeliver the vessel to RMT on 1st February 2010. The vessel is unlikely to find re-employment immediately, given the global glut in container fleet supply.
Additionally, the Group has been unable to take delivery of the 2nd Hanjin vessel, Hanjin Milano, which commenced its charter with Hanjin from Oct 1st and is currently being warehoused by Polaris Shipmanagement, a Rickmers Group company. Two other Hanjin vessels are also up for delivery over the next 3 months and we believe it is unlikely that the Group will be able to recognise revenue from these charters in the near term. While Rickmers has roughly US$200m of undrawn credit facility at this point, the facility will be frozen till negotiations with lenders are concluded.
We estimate RMT will continue to pay out 0.60UScts DPU in the near term, and may suspend distributions in the worst case, if unable to negotiate a solution to its balance sheet woes – namely LTV covenants, bullet loan repayment of US$130m in April 2010 and financing for the 4 x 13,000 TEU Maersk vessels due in 2010. Hence, we maintain our SELL call and cut TP to S$0.30, on the back of lower future DPU assumptions (in line with lower revenue).