PST – DBSV

Steady as she goes!

At a Glance

• 1Q11 distribution remained steady at 0.81 UScts per unit or ~71% of distributable cash flow

• Financing for all newbuild vessels arranged

• Expect DPU growth from 4Q11 onwards

• Maintain BUY at unchanged TP of US$0.40

Comment on Results

Good start to the year. Revenue and operating profit came in virtually unchanged on a y-o-y basis, but net profit improved 4% to US$6.9m owing to the lower interest costs as PST continued to pay down its debt steadily. Subsequently, net distributable cash (after loan amortisation) for 1Q11 came in slightly higher at US$6.7m vs. US$6.5m in 1Q10. The 70% payout ratio was maintained, and the Trust paid out US$4.8m or 0.81UScts per unit in 1Q11, a 2% increase y-o-y.

Outlook & Recommendation

Debt financing for all new vessels has been secured. To recap, PST has announced 3 separate acquisition deals in FY10 to drive growth and diversification of the fleet – two new Capesize bulk carriers for delivery in Sep 2011, 2 Multi Purpose vessels for delivery in Sep/Dec 2012 and 5 Supramax bulk carriers for delivery in Nov 2012 – Apr 2013. While the total capital commitments for the 3 deals amount to about US$333m over the next 2 years, the Trust has already secured a total of US$282m in bilateral financing commitments from six banks to finance the deals, which implies a high debt-to-value ratio of close to 85% and signals the faith of lenders in PST’s capital management and business strategy.

Growth expected from 4Q11. We remain positive on these yield accretive acquisitions and expect DPU growth at near 12% CAGR over FY10-12, even after accounting for a potential equity issue of US$40-50m in FY12. Maintain BUY with an unchanged TP of US$0.40. PST remains our top pick in the shipping trust sector.