Category: PST
FSL, PST – BT
DPUs fall at First Ship, Pacific Shipping in Q4
Income available for distribution also slips for both trusts
FIRST Ship Lease Trust (FSLT) and Pacific Shipping Trust (PST) both saw their distribution per unit (DPU) fall for the fourth quarter and full year of 2010.
FSLT recorded DPU of 0.95 US cents in Q4, a 36.7 per cent dive from 1.5 US cents for the year-ago period. PST saw a much milder dip, with its DPU down 2 per cent to 0.809 US cents from 0.827 US cent.
Both trusts saw fourth-quarter income available for distribution slipping. FSLT’s fell 36.7 per cent to US$5.68 million from US$8.98 million, while PST’s slid 8 per cent, from US$7 million to US$6.44 million for the quarter.
For the full year, total DPU for FSLT was 4.35 US cents, down from 7.90 US cents. PST’s stood at 3.227 US cents, down from 3.615 US cents.
Full year income available for distribution dropped for FSLT to US$28.48 million from US$50.85 million, whereas PST’s was US$26.52 million, down 2 per cent against 2009’s US$27.07 million.
FSLT posted revenues of US$24.1 million in the fourth quarter, 1.5 per cent down y-o-y, and US$100.5 million for the full-year, up 1.7 per cent from FY2009.
PST’s gross revenue from its 12 long-term charter vessels also stayed flat at US$15.3 million and US$61.3 million, a drop of 2 and 1 per cent, for the quarter and full-year period, respectively.
PST’s net profit shed 8 per cent to US$6.57 million for the quarter and was lower by 1 per cent at US$27.1 million for the full year.
FSLT sank into the red for the fourth quarter, with a loss of US$928,000, from profits of US$1.8 million in the same period last year. It also recorded losses of US$5.69 million for the full year, as compared with profit of US$8.42 a year ago.
Affecting FSLT’s bottom line was the arrest and re-delivery of two of its vessels, FSL Hamburg and FSL Singapore mid-last year.
FSLT took delivery of the vessels after their charterers said in May they ‘did not intend to continue to make full lease payments under the bareboat charter lease agreements’.
In June, they were subsequently arrested by Daxin Petroleum in China and Japan, as Daxin had not been paid for bunkers supplied to these vessels.
The overall financial impact of their arrest and re-delivery was at a cost of US$11.2 million to FSLT.
FSLT units gained half a US cent to end at 47.5 US cents in trading yesterday. PST closed half a US cent up at 37 US cents.
PST – BT
PST buys five bulk carriers for US$150m
MOVING further from its purely container ship holdings past, Pacific Shipping Trust (PST) has acquired five 57,000 deadweight-tonne (dwt) supramax bulk carriers for US$150 million.
This is the third such acquisition of non-container ship vessels made by PST in five months.
Now, one-third of PST’s 21 vessels are bulk carriers, up from the two 180,000-dwt capesize bulk carriers it bought in June, PST’s first diversification move.
Last month, it bought two 24,000-dwt multi-purpose vessels (MPPs) to add to its fleet of 12 container ships.
The five supramax bulkers will be built by Tianjing Xingang Shipbuilding Industry.
After delivery between October 2012 and April 2013, they will be leased to Korean-based logistics company Glovis on time charter agreements.
The agreements with Glovis add US$250 million to PST’s total contracted revenue, bringing that figure to US$800 million, an increase of 45 per cent.
The tenor of the Glovis charters will last eight and 10 years, and will provide PST charter income stretching into 2023.
PST would not reveal the daily charter hire rate secured from Glovis due to non-disclosure terms from the latter.
However, going by PST’s comments that charter rates are the same for all five vessels, this pegs the rate at about US$15,500 per day.
While its latest buys have been strictly non-container ships, Teo Choo Wee, acting CEO of PST Management, the trustee-manager of PST, told BT that the company would consider diving back into the vessel class now that charter rates have risen sharply since last year.
London shipbroker Clarkson said in September that charter rates for a gearless panamax ship of 3,500 TEUs (twenty-foot equivalent units) rose to US$18,250 a day from an average US$6,575 a day throughout 2009.
‘The charter rates to the price of the vessels didn’t make sense at all to buy more. But now it seems it’s different,’ said Mr Teo. ‘We’ve also heard that a number of good operators are out there looking for financing, so if there’s a good deal out there, we’d definitely consider it.’
PST has slowly decreased income reliance on its parent company, Pacific International Lines (PIL).
Glovis is now its majority contributor to total contracted revenue, making up 31 per cent of PST’s total.
PIL makes up 24 per cent of total charter revenue, down from 35 per cent; Jiangsu Shagang 24 per cent from its previous 34 per cent; and Cosco Xiamen 14 per cent, down from 19 per cent. CSAV takes up 7 per cent, down from 12 per cent.
Separately, PST announced that it has secured financing worth US$150 million from Bangkok Bank, DBS Bank and Malayan Banking that will pay for about 81.9 per cent of its MPPs and capesize bulkers, costing about US$183 million in total.
The remaining 20 per cent of the vessels’ cost considerations are drawn from ‘funds made available from PST’s existing cash retention programme’.
Mr Teo said the securing of the bank financing should make it unnecessary for PST to raise new equity to fund these acquisitions.
The loan-to-value (LTV) ratio of PST is now at 46 per cent for its 12 container ships.
When the two capesize bulkers are delivered in September 2011, it will increase to 52 per cent.
After all nine new vessels are delivered in 2013, LTV ratio will reach 55 per cent.
PIL will be providing pre-delivery down payment for the five new supramax bulk carriers.
PST closed trading in the market yesterday 1.5 cents higher at 36 US cents.
Shipping Trusts – BT
The lowdown on shipping trusts
IT hasn’t been much fun being a shipping trust, lately. If your creditor isn’t leaning on you, your client is reneging on you or asking for a 30 per cent discount on charter rates.
At some point in the past 18 months, at least one or a combination of these three vexing situations has been a reality for all three shipping trusts listed here – Rickmers Maritime Trust, First Ship Lease Trust (FSL) and Pacific Shipping Trust (PST).
Consequently, the past 18 months haven’t been a barrel of laughs for investors either. The share price for PST has lost about 23 per cent of its offer price value since the trust listed in 2006, while FSL and Rickmers have lost 55 per cent and 75 per cent respectively since they went public in 2007.
While the headlines for the trust sector have been glum in general, they have varied for each of the trusts across a spectrum of harrowing news.
Glum news
At one end of the spectrum has been Rickmers, which found itself unable to raise enough equity to buy seven vessels that it had committed itself to for US$918.7 million, even as it scrambled to refinance US$130 million in loan facilities with its banks.
About the same time, charterer Groda Shipping & Transportation told FSL to take back two tankers about four years early in May – but not before running up a US$4.1 million tab for unpaid bunker bills that led to tanker arrests and a 10 per cent dive in FSL’s share price.
Amid renewed fears of counter-party risk, some threw up their hands. OCBC Investment Research’s Meenal Kumar ceased coverage of the entire sector in June, citing ‘subdued trading volumes’. He also noted the difficulty of getting publicly available information on some of the trusts’ clients, such as Groda.
At the opposite end of the spectrum, however, PST’s trials were milder by comparison – and already seem to be receding into the past. Chilean liner CSAV, which charters two vessels from PST, caused a bit of a flap in April last year when it looked likely to negotiate a temporary 30 per cent reduction in charter hire payments.
But now, with CSAV’s turnaround in fortunes – it posted a record Q3 profit earlier this month – the threat of renegotiation has been reduced to a panicky footnote.
It is fitting that for Q3, only PST reported an increase in its distribution per unit (DPU) – albeit a small one of 1.7 per cent year on year.
Of the lot, PST has been favoured by analysts for its conservative financing strategy. It also scored points for its canny move to diversify into bulk carriers and multi-purpose vessels in measured doses that precluded any frantic equity-raising exercises.
FSL, on the other hand, is still being hobbled by the fall in revenue from the two tankers that Groda returned prematurely. Its Q3 distribution per unit of 0.95 US cent was 36.7 per cent lower year on year – and the outlook appears subdued.
DBS Group Research’s Suvro Sarkar cut DPU estimates for FY 2011 by 17 per cent to about one US cent per quarter.
FSL’s payout ratio is at 40 per cent as of Q3 – which is relatively prudent and not abysmal unless you are an investor who remembers getting 100 per cent of distributable cash flow in 2008 before the sector hit an ice patch.
What FSL does have in its favour is its vessel portfolio, which is the most diversified of the three – at a time when diversification has become a hedge against events that the sector cannot control, such as falling vessel values.
Diversification, on the other hand, is not on the immediate horizon for Rickmers’ all-containership fleet. After a period of giddy acquisition that preceded its financing woes – at one point, it had 11 containerships waiting to be delivered within a two-year span – it will be content with its existing 16 while it regroups.
While containership rates have recovered convincingly and are poised to improve next year, the much-dreaded double dip could undo it all.
And all else remaining equal, there is the 0.6 US cent cap on Rickmers’ DPU per quarter. It will be in place for at least as long as the trust is protected by the value-to-loan waiver granted by its creditors for up to three years. Its latest DPU of 0.57 US cents was a payout of just 13 per cent of distributable cash flow.
Stable and boring bet
It could work out for everyone, of course, and the sector could become the more exciting alternative to Reits that it was originally branded – and not in a way that causes indigestion.
But as things stand, PST – which its sponsor’s MD called ‘stable and boring’ in March, according to Lloyd’s List – looks like the sector’s best bet. When ‘boring’ is the best adjective for a sector, investors might just stock up on antacid tablets and move elsewhere.
PST – DBSV
Growth, diversification plans on track
At a Glance
• 3Q10 DPU of 0.83UScts in line with our expectations
• Existing cash flows look stable, diversification and growth plans remain on track with recent acquisition of 2 Multi Purpose Carriers for delivery in late 2012
• Trading at about 11% FY11 yield, maintain our BUY call at higher TP of US$0.39 (9% target yield on FY11 DPU)
Comment on Results
DPU of 0.83UScts was declared for the quarter, which is 5% higher than 2Q10 DPU but similar to the payout in 3Q09, when PST first started conserving 30% of distributable cash. 3Q10 revenue of US$15.6m held steady, and net profit was up 9% q-o-q to US$7.2m. After regular loan amortisation payment of US$4.3m, net cash generated for 3Q10 amounted to US$7.0m, of which approximately US$4.9m will be distributed to unitholders and the remaining US$2.1m retained for future working capital purposes.
Outlook & Recommendation
Following its earlier plans to acquire two new capesized bulk carriers for delivery in Sep 2011, PST has announced further growth plans and diversification into MPP vessels, with an order for 2 vessels worth US$60m for delivery in Sep/Dec 2012. The vessels will be chartered out for 10 years to COSCO Xiamen, a subsidiary of the COSCO Group. Pre-delivery payments for these ships will be supported by advances from sponsor PIL, and hence financing requirements will be back-loaded. To recap, the payment schedule for the bulk carriers are back-loaded as well, with 85% to be paid on delivery. Thus, while there is no immediate DPU accretion, there are no immediate funding needs as well.
Management is content to wait for better financing deals as they believe the market for ship financing is improving (it is possible to obtain more than 60% Loan-to-Value currently). Given the current cash buffer, we thus push back our equity fund raising assumptions to 2012, as we believe at least the bulk carrier deal can potentially be financed without raising additional equity. Maintain BUY, TP revised up to US$0.39, as we roll over valuations to FY11.
PST – BT
PST Q3 profit rises 3% to US$7.2m
PACIFIC Shipping Trust’s distribution per unit for the third quarter ended Sept 30, 2010 inched up 1.7 per cent to 0.832 of a US cent, up from 0.818 US cent for the same period a year ago.
Distributable income also barely budged, up 2 per cent from US$6.89 million to US$7.04 million for Q3.
For the nine months ended Sept 30, 2010, distributable income stayed flat at US$20.08 million against last year’s US$20.06 million.
Income to be distributed for the quarter stood at US$4.9 million, but was 13 per cent lower for the nine-month period, at US$14.3 million due to an increase in the income to be retained for working capital.
For the nine months ended Sept 30, 2010, income to be retained for working capital more than doubled year on year, from US$6 million to US$13.9 million.
Gross revenue from its 12 long-term charter vessels also stayed flat at US$15.6 million and US$45.9 million for the quarter and nine-month period, respectively.
Net profit crept up 3 per cent to US$7.2 million for the quarter and up one per cent to US$20.5 million for the first three quarters of 2010.
The trust has been going on a spree of sorts this year, buying two capesize bulk carriers in late-June and two multi-purpose vessels this month.
The multi-purpose vessels will be backed by a 10-year time charter contract with Cosco Xiamen, which will boost Q3 2012 revenue.
‘We are pleased to have delivered on our promise to unitholders to widen our charterer and asset base,’ said Teo Choo Wee, the acting chief executive officer of PST Management Pte Ltd, the trustee-manager of the trust.
‘The fact that we could conclude these two deals recently is a testament to our strong credibility in the shipping fraternity.’
The trust is expecting its gross revenue to increase next year, helped along by 10-year time charters for two 180,000 deadweight tonne capesize bulk carriers to Jiangsu Shagang Group Co Ltd.
‘We have been proactively managing charter revenue to ensure that PST more than replaces the revenue from vessels that will be coming off-charter,’ said Mr Teo.
The books’ closure date is Oct 28 and payment will be made on Nov 29.