Author: tfwee
Rickmers – BT
Rickmers Q1 earnings beat forecast by 54%
Unitholders okay acquisition of another contracted fleet of 13 ships
RICKMERS Maritime seems to be riding a huge swell forward as it yesterday announced another set of good results for the first quarter.
The shipping business trust posted a first-quarter revenue of US$22.33 million, 14 per cent higher than projected, while net profit came in at US$8.39 million, beating its forecast by 54 per cent. This is the fourth successive quarter that it has outperformed forecasts since its listing.
Rickmers attributed the good performance for the three months to March 31 to early delivery of newbuildings, lower cost of lubricant oil and smooth operation of the fleet. The trust was registered at the end of March last year and listed in May that same year.
With healthy cash flow from operating activities of US$16.93 million for the first quarter, Rickmers is able to keep its distribution policy of making regular quarterly distributions of 2.14 US cents per unit for this quarter. Total distribution comes up to US$9.07 million.
‘We are extremely happy to have exceeded projections for yet another quarter and believe that this further testifies to the hallmark of our business – its resilience and stability. In terms of strategy, we will continue to make accretive acquisitions and strategically manage our fleet in order to significantly grow our earnings,’ said the CEO of trustee-manager Rickmers Trust Management (RTM), Thomas Preben Hansen.
There is even more good news in store. Unitholders yesterday also approved the acquisition of an additional contracted fleet of 13 ships.
This will enable Rickmers to increase distributions by 5 per cent from 2.14 US cents to 2.25 US cents in the second quarter. The payout will be made in the third quarter and on an annualised basis unitholders will get a distribution payout of nine US cents.
Funding for the new vessels will comprise a combination of debt, equity and available cash reserves, RTM said.
The trust has adequate debt financing in place to fund at least the first six of the new vessels without raising any equity, and will be able to fund about 75 per cent of the US$1.35 billion purchase price with debt, if necessary.
Rickmers also recently secured US$627.5 million in new credit facilities. In addition, unitholders also approved a mandate allowing the trust to raise up to US$650 million of equity, representing about 50 per cent of the purchase price of the new vessels.
However, taking into account Rickmers Maritime’s adequate debt financing and excess cash flow from operations, the new equity requirement could amount to less than US$300 million.
Thus, the trust may consider a relatively small equity raising next year, with the majority of new equity to be issued for the acquisition taking place only in 2010 when the four largest vessels are due to be delivered, RTM said.
KREIT – BT
K-Reit’s free-float falls below 25% after rights issue
But number of free-float units more than doubles
K-REIT Asia’s free float of units will fall to 24.9 per cent from 27.1 per cent following the subscription by the Keppel Group for rights units not taken up by minority shareholders.
The trust’s rights issue of 396.9 million units priced at $1.39 per unit – which was 96.3 per cent subscribed, inclusive of excess rights applications – became fully subscribed after Keppel Corp and Keppel Land mopped up 14.9 million rights units, or 3.7 per cent of the issue, not taken up by minority shareholders.
While the free-float percentage will decline following the rights issue, the absolute number of free-float units will more than double from 67.7 million units to 161.2 million units.
Of the 14.9 million units, Keppel Corp took up 6.3 million units and Keppel Land 8.6 million units in line with their undertakings.
The rights issue will leave Keppel Land with 43.6 per cent of K-Reit’s enlarged equity base of 647.2 million units, and Keppel Corp will control 31.5 per cent. Prior to the rights issue, Keppel Land held 42.6 per cent of K-Reit’s total 250.2 million units, while Keppel Corp had 30.3 per cent.
K-Reit’s rights issue, which closed on April 25, will raise gross proceeds of about $551.7 million that will partly refinance the $942 million bridging loan K-Reit has taken from Keppel Corp to finance the trust’s acquisition of a one-third interest in One Raffles Quay. K-Reit bought the stake in One Raffles Quay from Keppel Land last year.
The $941.5 million acquisition price for the new Grade A office development works out to $2,109 per square foot (psf) of net lettable area. Stripping out income support of up to $103.4 million provided by seller Keppel Land through 2011 to K-Reit Asia reflects a lower net purchase price of $1,877 psf.
In a release yesterday, K-Reit said that based on gross proceeds of about $551.7 million from the rights issue, the trust’s aggregate leverage will be reduced from 53.9 per cent to 27.7 per cent and create for K-Reit about $679.8 million funding capacity based on 60 per cent leverage limit.
In late March, the trust manager’s CEO, Tan Swee Yiow, said in an interview with BT that management will look at a variety of options, including convertible bonds, commercial mortgage-backed securities and straight debt, to raise balance funds needed to repay the bridging loan.
K-Reit said yesterday the rights units will be listed on the Singapore Exchange from 9am on May 8. On the stock market yesterday, K-Reit ended six cents lower at $1.44.
KREIT – UOBKH
Gearing reduced after completion of rights issue
K-REIT received valid acceptances for a total of 382m rights units representing take-up rate of 96.3% at the close of the rights issue on 25 Apr 08. Keppel Corporation (6.3m) and Keppel Land (8.6m) has taken up the remaining 14.9m rights units that had not been subscribed in accordance with their irrevocable undertaking. Gross proceeds of S$551.7m from the rights issue will be utilised to refinance bridging loan taken for the acquisition of One Raffles Quay. Management estimated that this would reduce gearing from 53.9% to 27.7%.
Keppel Corporation will have an interest in 486m units or 75.1% stake in K-REIT, inclusive of units with Keppel Land. Keppel Land owns 282.23 units or 43.6% stake. The free float will be 24.9% after the rights issue. Liquidity should improve as free float has increase from 67.7m shares to 161.2m shares. Market capitalisation has grown to S$932m using yesterday’s closing price of S$1.44.
The rights units will start trading on Thursday, 8 May 08.
Rickmers – UOBKH
1Q08 Results better than expected, management to raise quarterly distribution from 2Q08 by 5%
Rickmers Maritime (RMT) announced a 13.6% qoq increase in charter income to US$22.3m, this was slightly better than expected, due to the early delivery of two vessels, the CMA CGM Jade and CMA CGM Onyx. Earnings for the period however, declined by 10.5% qoq to US$8.4m. This can be attributable mainly to the absence of negative goodwill on business combination (non-cash item) as well as higher transaction fees relating to the issue of new units as well as costs incurred for the upcoming acquisition of 13 containerships. Overall, results were better than expected.
Management to raise quarterly distribution from 2Q08 by 5% to 2.25 US cents. RMT will be increasing its distribution in 2Q08 by 5% to 2.25 US cents. This additional distribution will be funded by additional income from the new vessels which will join RMT’s fleet this year. This implies a full year payout of 8.89 US cents which implies an attractive distribution yield of 10.9% which is in line with our expectations.
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 seven years. RMT focuses on only the top liner companies in the world and its customers include Maersk Lines, CMA CGM, Italia Marittima, Hanjin Shipping and Mitsuit O.S.K. Lines. RMT is trading at an attractive distribution yield of 10.9%. We reiterate our BUY recommendation on RMT, with a target price of US$1.19 (S$1.61).
AREIT – UOBKH
4QFY08: Benefitting From Spillover Demand From CBD
A-REIT reported gross revenue of S$84.4m in 4QFY08, an increase of 13.9% yoy. Overall occupancy reached 98.4% as at Mar 08, compared with 96.6% last year. AREIT announced a DPU of 3.69 cents for 4QFY08, an increase of 11.8% yoy. This represents an annualised yield of 5.7% and will be paid on 30 May 08.
Positive rental reversion for Science & Business Park and Hi-Tech Industrial. A-REIT benefits from the shortage of office space within the Central Business District (CBD). This has forced many companies to relocate non-client-facing backroom and data centre operations to suburban locations such as Alexandra Technopark and Changi Business Park (CBP). There is also positive impact from an inflow of multinational companies expanding in Singapore. A-REIT signed renewed and new leases for a total net lettable area (NLA) of 784,925sf during the quarter, representing 9.7% of NLA for multi-tenanted buildings. Renewal rates for Science & Business Park and Hi- Tech Industrial were S$3.76 and S$3.10psf pm, 68.8% and 49.8% higher on a yoy basis.
A well-diversified portfolio. A-REIT had a portfolio of 84 properties and total assets of S$4.2b as at Mar 08. The weighted average lease to expiry is 5.9 years. A-REIT has a quality and well-diversified tenant base of over 790 international and local companies. The top 10 tenants account for 27.9% of portfolio income. The largest tenant, Singapore Telecommunications, accounts for only 6.5% of portfolio income. A-REIT’s weighted average funding cost is 3.1% due to its corporate rating of A3 and consistent track record. It will be concluding a three-year S$200m transferable loan facility, after which the earliest date for refinancing is Aug 09.
Maintain BUY. A-REIT provides FY08 distribution yield of 5.81%, a healthy spread of 3.46% over 10-year Singapore government bond yield at 2.35%. Our target price is S$3.00 based on the two-stage dividend discount model.