Pacific Shipping Trust : Shipping Trust with a portfolio of 10 container vessels on charter to sponsor PIL and CSAV
Rickmers Maritime : Business trust fund to own and operate containerships under long term, fixed rate charters to container liner shipping companies
Liner companies looking to push rate hikes. Most of the leading container carriers, including Maersk and NOL are now looking to arrest the free fall in container freight rates through coordinated rate increases. While the problem of lower trade volumes, idle capacity and a huge orderbook will still need some solving, we may be seeing some stability in rates for the rest of 2009. This, combined with the improving sentiment about a global economic recovery in 2H09, should spur renewed confidence in container shipping stocks, and consequently, shipping trusts.
Visibility improving bit by bit. FSLT has a more diversified fleet than peers – with about 38% exposure to containers and 65% to tankers (oil, chemical, product). With the oil price in recovery mode, counterparty risk may be reduced. Moreover, FSLT has no big refinancing risks before 2012. Elsewhere, with the US$360m lifeline thrown to CSAV by German owners last week, PST’s fortunes may be looking up as well. However, RMT has to contend with unfunded capital commitments and an upcoming bullet loan repayment in FY10 and the picture still looks hazy.
FSLT is our top pick, upgrade to BUY. Given the healthy response to the 1Q09 dividend re-investment scheme, investors seem to be giving the thumbs up to FSLT’s attempt to align the interests of both short-term and long-term investors. As such, given the lack of near-term concerns, we believe there is better visibility to FSLT’s dividend payouts, despite trading at much higher yields of about 25%. Hence, we upgrade the stock to BUY, and our DDM-based TP is revised up to S$0.71.
Upgrade PST to HOLD. We are also upgrading our call on PST to HOLD with a revised TP of US$0.20, given that the worst that can happen now on its CSAV charters is a 35% rate cut. Elsewhere, we maintain our HOLD rating on RMT with a revised DDM-based TP of S$0.50.
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