Author: tfwee
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.
HWT – BT
Distributions on track
Story: Hyfux Water Trust once again surprised us on the upside, with 2Q08 net earnings of S$2.2m (up 94% q-o-q) adding up to almost 52% of our existing FY08 forecast. Net payout to investors for HY08 stood at 2.17 S cents (after Hyflux waiver) as against projected DPU of 2.09 S cents as per IPO prospectus.
Point: The surprise in earnings was mainly a result of lower-than-expected operating expenses and lower trust expenses. HWT continues to excel as far as cost management is concerned and even bettered its1Q08 operating margins (68% in 2Q vs. 48% in 1Q), with operating expenses of only S$1.2m on tariff receipts of S$3.8m. Tariff receipts were up 19% q-o-q as utilisation rates jumped from 51% in 1Q08 to 63% in 2Q08 and two more plants were completed, bringing the design capacity of completed plants to 325,000 cu m/day. The Trust looks to be on track to meet its DPU guidance of 4.88 S cents (after waiver) for the year – given that the remaining three plants are expected to be completed before the end of the year and utilisation rates should move closer to 70%. Management is further negotiating organic expansion potential for four existing plants of about 155,000 cu m/day, which should see closure in 6-9 months.
Relevance: We have revised up our DPU forecast for FY08 by 7% to account for the better-than-expected margins achieved in 2Q08, while leaving our FY09 forecasts unchanged awaiting further visibility on the sustenance of margins. Our DDM-backed Target Price remains unchanged at S$0.90 and we continue to maintain BUY on the stock, while keeping a close watch on how the acquisition scenario unfolds as HWT deliberates on the first tranche of assets offered by sponsor, Hyflux. Current dividend yield is attractive at 7.5%-8.4% for FY08-09 and represents a good entry point, in our opinion.
Rickmers – BT
Rickmers beats Q2 forecast with US$9.2m profit
SHIPPING trust Rickmers Maritime reported a net profit of US$9.2 million for the second quarter ended June 30, 53 per cent higher than its forecast.
Total revenue of US$26.22 million also beat projections by 14 per cent, while the distribution per unit (DPU) was 2.25 US cents, 5 per cent more than the forecast 2.14 US cents.
Rickmers Maritime was constituted on March 30, 2007, and commenced activities only upon its listing on May 4, 2007.
As such, comparisons were done with projections as ‘comparisons with actual figures would not be meaningful’.
For the first six months of the year, net profit totalled US$17.59 million, 53 per cent better than forecast, while US$50.87 million was chalked up in total revenue, 19 per cent higher than the projected US$42.65 million.
DPU for the first half was 4.39 US cents compared with the forecast 4.28 US cents.
The strong performance was on the back of smooth operation of the fleet, lower cost of lubricant oil and early delivery of newbuildings, Rickmers Trust said in a statement.
Charter revenue for 1H08 amounted to US$46.01 million, 8 per cent higher than expected.
‘We secured a total debt of US$627.5 million in the midst of credit crisis as well as achieved shareholder approval for Rickmers Maritime to raise up to US$650 million of equity. These measures provide us with sufficient financing flexibility to execute our acquisition strategy going forward,’ said Quah Ban Huat, CFO of Rickmers Trust Management, the trustee-manager.
As at June 30, Rickmers Maritime’s portfolio comprised 11 container ships, which are chartered out on long-term, fixed-rate time charter basis with an average remaining charter period of seven years.
Rickmers’ shares closed one cent down at $1.13 yesterday.
HWT – BT
Hyflux Trust first-half DPU rises 4%
Interim period saw distributable cash of $4.5m
HYFLUX Water Trust (HWT), the first pure-play global water business trust to be listed in Asia, yesterday reported distributable cash of $4.5 million for the first half of the year.
This translates to distribution per unit (DPU) of 2.17 cents – 4 per cent higher than the forecast 2.09 cents. Based on yesterday’s closing price of 63.5 cents per unit, the DPU works out to an annualised yield of 6.8 per cent.
However, HWT is forecasting full-year DPU of 4.88 cents, reflecting a yield of about 7.7 per cent, and the trust said it expects to meet the forecast.
For the second half of the year, utilisation rate of its water treatment plants is expected to increase, while more plants will be completed, the trust said.
‘We are pleased that HWT has exceeded its forecast for its first distribution,’ said Saud Siddique, chief executive of the trustee-manager. ‘HWT’s performance is underpinned by the positive outlook in the water industry in China, and the strong fundamentals of our projects.’
Mr Siddique said that of the trust’s initial portfolio of 13 water treatment plants in China, 10 are in operation while the rest will be finished by the year-end.
There are no comparison figures for the previous period as the trust’s portfolio was constituted only late last year. The trust distributes cash every six months.
For the quarter ended June 30, HWT reported total revenue of $16.7 million and net profit of $2.2 million.
This was double the Q1 net profit of $1.1 million on lower trust expenses, hedging and forex gains, said Grace Goh, HWT’s chief financial officer and chief investment officer.
Nine plants from sponsor Hyflux Limited with total capacity of 290,000 cubic metres a day are now being considered for injection into the trust and HWT is on target to submit the proposed injection to unitholders for approval by November this year, Mr Siddique said.
‘We are focusing on growing the asset base as fast as possible. As we bulk up we will become more attractive to a wider investor base,’ Mr Siddique added. In all, Mr Siddique said, the trust has a ROFOAR (right of first refusal and right to match) pipeline from sponsor Hyflux of 20 projects totalling 815,000 cubic metres a day, spread over seven provinces in China.
He added that the trust, which now has no gearing, is actively seeking debt financing to expand its portfolio of water treatment plants.
HWT has secured a committed three-year revolving credit facility of US$66 million with an interest margin of Libor/Sibor plus 98 basis points.
The trust is targeting up to 50 per cent gearing, using debt from banks rather than bonds, Mr Siddique said, and it may look to equity financing once that threshold is reached.
Rickmers – UOBKH
2Q08: Results within expectations; management raise quarterly distribution by 5% as promised
Rickmers Maritime (RMT) announced a 6.0% qoq increase in charter income to US$23.7m accounting for 23.4% of our FY08 forecast. Charter revenue less vessel operating expenses increased by 6.3% qoq to US$18.7m accounting for 23.9% of our FY08 forecast. Earnings for the period increased 9.7% qoq to 9.2%.
Distribution of 2.25 US cents declared for 2Q08. RMT has increased its DPU for the period by 5% to 2.25 US cents within our expectations and management’s guidance. Payment of distributions is scheduled for 29 Aug 2008 with books closure date set for 20 Aug 2008 (units trade ex-distribution on 18 Aug 2008).
Greater financing by debt going forward. RMT currently has another 12 vessels scheduled for delivery between now and 2011 which were originally intended to be funded by equity. However, given the current market conditions, RMT’s management has opted to utilise greater debt funding for its acquisitions. Previously, RMT had guided on a self imposed Debt/ Equity target of 1:1. Going forward however, they are guiding on increasing this to approximately 7:3 and have guided that they feel comfortable operating at 75:25.
Earnings forecasts lowered as we shift our model to greater debt financing: No change to DPU forecasts. Given this change in RMT’s financing, we have adjusted our earnings forecasts to account for a greater proportion of debt financing and less equity financing. As such, our earnings forecasts for FY08 and FY09 have been increased by 18.6% and 8.7% respectively. Our DPU forecasts remain however remain unchanged as we expect RMT to retain a greater portion of cash due to the amortising nature of its new loans.
Maintain BUY; target price unchanged at US$1.19 (S$1.61). We continue to like RMT given its vessels are chartered out on long-term fixed time charters, with an average duration of 8.5 years. Counter-party risk is low given that RMT’s existing clients are within the top 12 liner companies in the world which include Maersk Lines, CMA CGM, Italia Maritima, Hanjin Shipping and Mitsui O.S.K. Lines. RMT is trading at an attractive distribution yield of 10.8%. We reiterate our BUY recommendation on RMT, with a target price of US$1.19 (S$1.61).