Four possible options on the unfunded capex. They are: a) equity/debt funding, possibly on 30:70 basis (in our opinion), b) selling the vessels, c) sale and leaseback and d) settlement with Rickmers Group, the original owner of the four vessels. A total deposit of US$40m (5.6% of vessel cost) for the vessels is payable to RMT’s parent company Rickmers Group one year before the expected delivery date ie. Jul-Sep 09. The balance amount of US$672m (94.4%) will be paid upon delivery of the vessels in 2H10.
Correction in ship prices might have breached LTV covenants. RMT’s management has guided containership prices without charter contracts have fallen about 30-50% from the peak in 2008 and only expects the shipping market to pick up in two years’ time. We do not rule out a breach in RMT’s loan-tovalue (LTV) covenants of 90% in view of the recent collapse in ship values. That said, a lot of shipping companies have breached their loan covenants and bankers look for win-win situations, as it is not a solution to take possession of ships. RMT is in discussions with its bankers on the possible waiver of the LTV covenants.
Maintain HOLD, fair price S$0.76. We forecast DPU yields of 19.6% and 17.6% for 2009 and 2010 respectively. While our fair price of S$0.76 is 28% above its current share price, we maintain our HOLD call in view of its unfunded US$712m capex due in 2010. However, we see a re-rating in RMT should the trust manage to resolve its financing hurdle.
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