Singapore - Shipping Trusts ( General News )

Singapore - Shipping Trusts ( General News )

Postby winston » Thu Jun 26, 2008 10:59 pm

DJ MARKET TALK: S''pore Shipping Trusts'' High Ylds Overlooked -DMG (2008-06-26 06:37:00)

0637 GMT [Dow Jones] Singapore shipping trusts'' current yields of around 11% make them the best asset class in Singapore in terms of returns, but high yields also make yield-accretive acquisitions "a lot more difficult", crimping expansion plans, says DMG.

Adds high yields also a problem when shipping trusts seek to raise capital as more units would have to be issued due to their low prices, resulting in earnings dilution. Still, trusts "most definitely" worth a look, as their tax-free yields offer support to unit prices amid current market volatility and provide cushion against inflation.

Notes while First Ship Lease Trust (BM6U.SG), Pacific Shipping Trust (P48U.SG), Rickmers Maritime (B1ZU.SG) remain largely ignored by investors due to lack of critical mass and understanding of their business model, they''ll be "looked upon favorably as the markets get increasingly volatile and investors seek safe havens.

" House has no rating on all 3 trusts. FSL off 0.8% at S$1.25, PST flat at US$0.405, Rickmers flat at S$1.15. (FKH)
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Re: S'pore Shipping Trusts - General News

Postby winston » Wed Sep 10, 2008 2:15 pm

Vested in Rickmers. From OCBC:-

Ships and sustainability
SINGAPORE Sector Update


Priced or mispriced? The three Singapore-listed shipping trusts – Pacific Shipping Trust (PST), Rickmers Maritime (RMT) and First Ship Lease Trust (FSLT) – are currently trading at very high distribution yields of about 12-15%, or a staggering 10,000 basis point spread over the 10 yr Singapore government bond yield. While this particular asset class is new to Singapore, similar structures exist elsewhere. The trusts have historically traded at a 300-500 basis point premium over their US peers. While the headline yield is attractive, it is not a free lunch (in our view) as it comes hand in hand with some significant debt and equity requirements.

Business model relies on external financing… Vessels decline in value as they age and the shipping trusts address their need for fleet renewal either indirectly or directly by using their cash earnings to:-
(1) pay out the depreciated asset value as fair compensation for the loss in equity value (which increases the headline yield number but is not income),
(2) partially repay debt and preserve net asset value or
(3) retain and use towards buying new vessels.

Debt-funded assets are also depreciating and the principal value must eventually be repaid (or refinanced). On top of this, all
three trusts have ambitious growth plans. The cash earnings generated and retained by the trusts is not enough to fund these growth plans internally.

…in an uncertain world. Keeping in mind an aggressive payout policy (of varying degrees) and aggressive growth plans (across the board); we believe that the shipping trust model relies extensively on external financing. We believe that in today’s market conditions, there is limited investor (or even lender) appetite for structures that are reliant on debt and equity
expansion to sustain their business and growth model. The weakening outlook for the shipping industry is a further complication. Based on the risk-reward quantum in play today, we downgrade our rating on the shipping trust sector from Overweight to NEUTRAL.

We peg our fair value to ‘floor value’. In the current climate, we prefer to continue to value the shipping trusts on a discounted free cash flow to equity basis. On this ‘floor value’ basis, we have a BUY rating on PST [fair value: US$0.41], a BUY on RMT [fair value: S$1.22], and a HOLD recommendation for FSLT [fair value: S$1.20]. Our top pick is RMT because of its relatively less aggressive payout policy and the credit facilities it already has in place to partially support its growth plans.
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Re: S'pore Shipping Trusts - General News

Postby winston » Fri Oct 17, 2008 4:33 pm

From OCBC:-

Sharp sell-off across sector

Pessimism rules the seas. We attended Marine Money’s Asia conference earlier this week where the mood of both speakers and participants was overwhelmingly pessimistic. Conversation was focused on two key themes:
1) consequences of the current credit crisis on ship and trade finance; and
2) unfavorable industry outlooks, especially for the container and dry bulk sub-sectors.

Sharp sell-off across trusts. First Ship Lease Trust (FSLT); Pacific Shipping Trust (PST); and Rickmers Maritime (RMT) were all in attendance.

Since our last sector report dated Sept 10, the shipping trusts have seen a sharp sell-off in share prices (FSLT down 61%, RMT down 58%, and PST down 37%). We attribute the decline to both transient fears: today’s abnormal credit conditions which have paralyzed equity markets; and to more enduring concerns: the trusts’ extensive use of leverage and overall
industry concerns.

Beware the fine print. FSLT announced last week that its lenders had invoked the market disruption clause (MDC) as the reference rate on the loans, the US$ LIBOR, did not accurately reflect the lenders’ actual cost of funds. With increased interest costs, FSLT reduced its DPU guidance for 4Q08 by 1%. PST and RMT told us that some version of the MDC also
exists in their loan documents but it has not been invoked as of now. The MDC is a standard clause in almost all loan documents. In our view, the next bit of fine print to watch is loan-to-value.

Multiple layers of risks. There is a very real risk of a large depreciation in underlying asset and rental values. Falling asset values can breach a loanto-market value covenant, triggering a technical default (and potentially distressed sales). We note that PST is the only shipping trust without a version of this clause in its loan documents. Meanwhile, counterparty risk
is also becoming more of a concern – a charterer default or rate renegotiation could stress cash flows, endangering distributions or debt repayments.

Committed capex is another possible stressor.
The recent sell-off is an overcorrection (in our view) but market logic is trumping everything else at present and we believe we could see further value destruction. We maintain our BUY ratings on PST and RMT, and our HOLD rating on FSLT but place all our fair value estimates under review as we work in latest developments. We believe the trusts will continue to be barraged by negative news flow on the shipping industry.
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Re: S'pore Shipping Trusts - General News

Postby winston » Wed Oct 21, 2009 8:21 pm

Ha Ha ...

From UOBKH:-

Shipping Trusts
Terminating coverage


We are terminating coverage of First Ship Lease Trust (FSLT SP), Pacific Shipping Trust (PST SP) and Rickmers Maritime (RMT) as of today.

The last earning estimates, target prices and ratings issued for these stocks should
not be relied upon in the future.
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Re: S'pore Shipping Trusts - General News

Postby millionairemind » Wed Oct 21, 2009 8:24 pm

winston wrote:Ha Ha ...

From UOBKH:-

Shipping Trusts
Terminating coverage


We are terminating coverage of First Ship Lease Trust (FSLT SP), Pacific Shipping Trust (PST SP) and Rickmers Maritime (RMT) as of today.

The last earning estimates, target prices and ratings issued for these stocks should
not be relied upon in the future.


It means " WHAT WE HAVE BEEN SAYING COUNTS FOR NOTHING, WE DON'T KNOW ANYTHING AND WE ARE JUST BLINDSIDING YOU HOPING THAT YOU WILL BELIEVE US" :mrgreen: :mrgreen: :mrgreen:
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong" - Bernard Baruch

Disclaimer - The author may at times own some of the stocks mentioned in this forum. All discussions are NOT to be construed as buy/sell recommendations. Readers are advised to do their own research and analysis.
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Re: S'pore Shipping Trusts - General News

Postby Musicwhiz » Wed Oct 21, 2009 8:54 pm

winston wrote:Ha Ha ...

From UOBKH:-

Shipping Trusts
Terminating coverage


We are terminating coverage of First Ship Lease Trust (FSLT SP), Pacific Shipping Trust (PST SP) and Rickmers Maritime (RMT) as of today.

The last earning estimates, target prices and ratings issued for these stocks should
not be relied upon in the future.

Analysts are all hypocrites.
Please visit my value investing blog at http://sgmusicwhiz.blogspot.com
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Re: S'pore Shipping Trusts - General News

Postby winston » Sat Jun 12, 2010 12:25 pm

Not vested. From OCBC:-

Shipping trusts: Counterparty risks

Summary: FSL Trust (FSLT)’s recent struggles with charterer Groda Shipping and bunker-supplier Daxin Petroleum have put counterparty risks at the forefront for the Singapore-listed shipping trusts sector. Our biggest concern is the opacity of the industry and shipping trust structure (akin to a fund-of-funds that relies on the credit strength of its charterers and sub-charterers).

Another concern, in our opinion, is the balance of power between third-party ship owners and charterers. The privilege of being a ship owner loses a little shine when weighed against the vulnerability to charter renegotiations, defaults or even vessel arrests by third-party creditors.

On the positive side, the demand picture for some sub-sectors is markedly brighter, though concerns remain on the speed and trajectory of economic growth. We note that credit defaults typically peak several months after the broader industry hits bottom.

The sector, on average, still trades at a steep discount to IPO prices. Due to subdued trading volumes, we are DISCONTINUING COVERAGE of the sector [prev: NEUTRAL] and associated stocks, FSLT [prev: HOLD, S$0.48] and PST [prev: HOLD, US$0.29]. (Meenal Kumar)
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