Rickmers – DBS

April D-day looming up

At a Glance

• 4Q09 DPU payout of 0.57Uscts, 5% lower than 3Q09

• Loan restructuring process drags on; revenue growth stymied by inability to take on vessels on orderbook

• Significant near term liquidity risk in the form of US$130m bullet repayment less than 2 months away

• Limited DPU visibility, maintain SELL with TP of S$0.30

Comment on Results

In spite of the uncertain outlook, RMT’s quarterly report card continued to impress, underpinned by long-term cash flows. On a sequential basis, operations were stable, with revenues coming in flat at US$38m and cash generation of US$18.6m, down 4%. Net profit surged 65% q-o-q to US$15.2m, however, owing to US$6m accelerated amortisation of deferred income from charter contract – resulting from early redelivery of the Maersk Djibouti. Excluding this non-cash gain, net profit would have been at par with 3Q09.

Outlook & Recommendation

While revenues have been steady for the last 3 quarters, we should see some decline from 1Q10, owing to the redelivery of the aforementioned Maersk vessel on 1 Feb 2010. The vessel will be shortly sent for drydocking but employment thereafter is not guaranteed, and neither are freight rates likely to be attractive.

Except the Hanjin Newport, which the Trust took delivery of last year, the remaining 3 Hanjin 4250 TEU vessels have been delivered to and are currently being warehoused by parent, Rickmers Group. We believe it is unlikely that the Trust will be able to recognize revenue from these charters in the near term as well. While RMT has more than US$150m of undrawn credit facility at this point of time, the facility is likely to be frozen, till ongoing multiparty negotiations involving its 10 lenders and its parent are concluded.

RMT has formed a Finance Committee – comprising 4 Independent Directors – to safeguard the interests of minority shareholders in the loan restructuring process, but we are not hopeful of an early resolution to the crisis. Till then, operating cash flows may have to be fully redirected towards loan repayment, and visibility on future DPU payout is extremely limited. Maintain SELL.