Rickmers keeps Q4 DPU at 0.6 US cts

RICKMERS Maritime reported distribution per unit for the fourth quarter ended Dec 31, 2011 of 0.60 US cents, unchanged from the year-ago period.

The shipping trust’s full-year DPU comes up to 2.4 US cents, which marks a 4 per cent increase from 2010’s 2.31 US cents.

Q4 cash flow available for distribution – before payment to debtors – for the final quarter was down 13 per cent from the previous year to US$25.8 million from US$29.7 million

For the full-year, cash flow for distribution before debt repayment was US$107.3 million, a 6 per cent decline from FY2010’s US$114.3 million.

Rickmers recorded US$11.3 million of net profit for the last quarter of fiscal 2011, 43 per cent down from the preceding year-ago quarter’s $20 million, which included a US$7.3 million vessel impairment writeback.

It also managed to reverse its 2010 losses to end the year firmly in the black, with $40.3 million net profits compared to 2010’s $28.6 million loss, which took into consideration a US$64 million compensation fee to discharge the group from its obligation to purchase seven vessels.

Rickmers managed to bump up its fourth-quarter and full-year revenue by 3 per cent and 2 per cent, respectively, to $37.8 million and $149.5 million. This was thanks to a higher daily charter rate of US$23,888 for its box ship Kaethe C Rickmers, in effect since March 25, 2011, from the previous rate of US$8,288.

However, Rickmers management warned that as the vessel finishes its one-year charter contract and is redelivered in a few weeks’ time, it may not find immediate re-employment.

And even if it does, said CEO of Rickmers Maritime’s trustee-manager, Thomas Preben Hansen, Kaethe C Rickmers’ secured charter rate would be far lower than in its previous outing.

That said, Rickmers’ 15 other container vessels are on long-term leases stretching until 2019, with average daily charter rates of US$26,120 in 2012. These agreements will fetch the trust US$615 million of secured revenue between Jan 1, 2012 till 2019.

Given the collapse of charter rates which have resulted in some charterer defaults in the dry bulk vessel segment, Mr Hansen said that the same has not yet been seen in the container vessel segment.

‘I don’t foresee the same degree of default and reneging that has been happening in dry bulk sector (in the container shipping market),’ he said, explaining that the bulk carrier market has far more smaller operators than container shipping.

Mr Hansen said that Rickmers has no plans to buy new vessels.

Rickmers Maritime was last traded at 31 cents.

Exit from waiver period not in sight

At a Glance

• DPU payout for 2Q11 maintained at 0.60UScts as accelerated repayment of loans continues

• Covenant waiver period likely to continue as container shipping fundamentals weaken, further raised uncertainty in future asset values

• Maintain HOLD with TP of S$0.37 as DPU cap stays

Comment on Results

Cash flows up slightly in 2Q11. RMT recorded revenues of US$37.6m in 2Q11, 3% higher y-o-y, owing to the higher charter rate received from employment of vessel Kaethe C. Rickmers, which is now fixed at US$23,888 per day compared to US$8,288 per day in 2Q10. This also resulted in a write-back of vessel impairment of US$2.9m for Kaethe C. Rickmers, but was more than offset by an impairment of goodwill charge of US$4.1m on another vessel as internal WACC for impairment check was raised from 7.28% to 7.52%. These items are, however, non-cash in nature and distributable cash flows increased 8% q-o-q to US$17.5m.

DPU stays at 0.6SUScts, loan repayments continue. The Trust repaid about US$11.2m of borrowings in 2Q11 – ahead of scheduled repayment of about US$8m – and distribution to unit holders remained steady at US$2.5m for 1Q11, translating to a DPU of 0.6UScts, at the upper end of the DPU cap imposed by lenders.

Outlook & Recommendation

DPU cap could stay for a while. The Trust will continue to use its cash reserves of about US$50m to pay down debts in excess of scheduled repayments in 2H11. However, the Trust’s DPU cap is likely to be in place as long as the Value-to-Loan ratio on the IPO facility and subsequent top-up facility (about US$411m of which is outstanding currently) is below the covenant limit of 133%. According to our estimates, the market value of the 10 vessels which are encumbered could be around US$480m currently, which implies a coverage ratio of only 117%. And with container shipping likely heading towards a potential down cycle, asset values could come under further stress. Thus, we maintain our HOLD call on the stock, and our TP remains unchanged at S$0.37.

Rickmers’ Q2 DPU up 5%; net profit soars

RICKMERS Maritime declared a distribution per unit (DPU) of 0.6 US cent for its second quarter ended June 30, 2011 yesterday, up 5 per cent from its DPU of 0.57 US cent in Q2 2010.

Cash flow available for distribution before payment to debt capital providers stood at US$26.5 million for the quarter, 4 per cent lower year on year. For the first six months of the year, the figure stood at US$51.4 million, a dip of 6 per cent from the corresponding period a year before.

After accounting for payment to the trust’s debt capital providers, US$3.7 million was available for distribution, 70 per cent lower than US$12.2 million in Q2 last year.

For H1 2011, cash available for distribution after paying off the trust’s debt capital providers was US$5.6 million, 80 per cent lower from US$27.5 million the year before.

Revenue for the quarter grew 3 per cent to US$37.6 million, driven by a better net charter rate of US$23,888 per day which the trust had secured for the Kaethe C Rickmers in late March, up from US$8,288 a day in Q2 last year.

The charter lease on the Kaethe C Rickmers expires in March next year.

For the first half of the year, revenue was flat, at US$73.4 million.

The trust’s quarterly net profit surged to US$8.6 million from US$610,000 the year before, driven by a writeback of US$2.9 million on vessel impairment because of the Kaethe C Rickmers.

The trust’s bottom line also fared better relative to 2010 because it had incurred a one-time loan restructuring of US$5.4 million in the second quarter of last year.

On a half-year basis, net profit for H1 2011 was US$17.9 million – almost triple that of H1 2010’s net profit of US$6 million.

Currently, the trust has a fleet of 16 container ships with an average daily time charter rate of US$25,750 per vessel.

Thomas Preben Hansen, chief executive of Rickmers Trust Management Pte Ltd (RTM) – the trust’s trustee manager – said that there are no current plans to add vessels to the fleet.

‘We are always on the lookout, but we’ve really been focused on deleveraging the business,’ he said.

In response to a question about whether the trust was currently able to meet its value-to-loan covenants for which it has a waiver of another one-and-a-half years, Gerard Low, RTM’s chief financial officer, said that there is still uncertainty about the outlook for ship values.

‘The value of the ships had stabilised in the early part of this year but as we approach this period, there has been a big increase in orders for new ships,’ he said.

‘The one (variable) that we can control is the loan value. As we accelerate the repayments, we know that we are bringing down the loan value.’

Last year, as part of a move to solve its funding issues, Rickmers signed a term sheet with its lending banks for a five-year extension of its US$130 million top-up loan facility. Under the terms, the criteria of the value-to-loan ratio had been waived. As a condition of the waiver, the trust’s DPU is capped at 0.6 US cent per quarter.

‘We are also watching this closely. When world trade is increasing and stable, the shipping capacity in under control and we have the resources, only then can we confidently say when we are ready to negotiate directly with the banks to get out of this waiver period,’ said Mr Low.

The trust’s counter closed half a cent higher to 41 cents in trading yesterday, before its results were released.

Accelerated loan repayments continue

At a Glance

• DPU payout for 1Q11 maintained at 0.60UScts; in line with our expectations

• Accelerated repayment of loans continue, with another US$12.6m repaid in 1Q11

• Unlikely to meet conditions for removal of DPU cap in near term, maintain HOLD with TP of S$0.37

Comment on Results

Stable cash flows in 4Q. RMT’s topline fell 3.5% y-o-y owing to the lower charter rate for the vessel Kathe C. Rickmers, which was fixed at only US$8,288 to CSAV for the first year up to March 2011. Currently, the rate has been revised up to US$23,888 as CSAV exercised the option to renew the lease by 1 more year amid an improving charter market. Distributable cash flows remained stable on a y-o-y basis at US$16.3m for 1Q11.

DPU stayed at 0.6UScts, loan repayments continued. As the Trust repaid about US$12.6m of borrowings in 1Q11 – ahead of scheduled repayment of about US$8m – distribution to unitholders remained steady at US$2.5m for 1Q11, translating to a DPU of 0.6UScts, at the upper end of the DPU cap imposed by lenders.

Outlook & Recommendation

DPU cap could stay for a while. The Trust will continue to accelerate its deleveraging program in FY11, and borrowings could reduce from US$669m at end-FY10 to about US$624m at end-FY11. However, during the 3-year waiver period, the Trust’s DPU cap would be in place as long as the Value-to-Loan ratio on the IPO facility and subsequent top-up facility (about US$416m of which are outstanding currently) are below the covenant limit of 133%. According to our estimates, the value of the 10 vessels, which forms the security for the above facilities, is unlikely to cross that barrier in the near term, even after accounting for the gradual decline in borrowing level. Thus, we maintain our HOLD call on the stock, and our TP remains unchanged at S$0.37, pegged to 8% FY11 target yield. As highlighted earlier, balance sheet remains the key focus for management and acquisition driven growth will have to wait.

Rickmers Q1 DPU up 5% at 0.60 US cent

Trust expects to continue generating steady cash flow

ON the back of a stable topline, Rickmers Maritime has declared a first-quarter distribution per unit (DPU) of 0.60 US cent, up 5 per cent from 0.57 US cent a year earlier.

The distribution was also equal to the preceding fourth-quarter’s DPU.

Net profit for the three months ended March 31, 2011, increased 72 per cent from US$5.43 million in Q1 2010 to US$9.33 million, helped by unrealised gains on cash flow hedges from four interest rate swaps and lower vessel operating expenses.

But cash flow available for distribution (before payment to debt capital providers) slipped from US$27.19 million to US$24.94 million due to movement in working capital and dry-dock reserves.

Rickmers Maritime’s charter revenue for the quarter dipped 3 per cent to S$35.86 million from US$37.16 million a year earlier. This was attributed to a smaller contribution from Kaethe C Rickmers, a 5,060 TEU container ship which earned a daily charter rate of US$8,288 up to March 24.

Since March 25, its daily charter rate has been increased to US$23,888, and the business trust expects stronger charter revenues in the upcoming quarters.

Rickmers Maritime has also upped its repayment of bank loans to US$12.66 million this quarter, from US$2.78 million in Q1 2010, and hopes to continue to improve its gearing. With a current debt/equity ratio of 2:1, its target is 1:1.

Rickmers Trust Management chief executive officer Thomas Preben Hansen said Rickmers Maritime has started the financial year positively.

He said: ‘Our financial position has strengthened significantly as we continue with deleveraging efforts.’

With its fleet of 16 vessels fully employed through 2011 and having a remaining committed revenue of about US$725 million in the coming eight years, Mr Hansen is confident about the container shipping market.

He expects better market conditions in the second half of the year and the trust to continue to generate steady cash flows.