Pacific Shipping Trust (PST) reported 2Q09 net profit of US$6.7m (+0.8% qoq, -20.2% yoy). Excluding losses from interest rate swaps, earnings would have been US$8.7m (+0.5% qoq; +79.6% yoy). PST declared a 2Q09 DPU of 0.99 US cents, similar to 1Q09 DPU of 0.98 US cents, but lower than 2Q08’s 1.09 US cents.
We estimate 2009 and 2010 dividend yield of 12.7% and 10.0% respectively after adjusting for a change in distribution payout policy from 90% to 70%. Maintain BUY with target price of US$0.37.
The trust is reducing payout ratio from 90% of distributable cash flow to not less than 70% for 3Q09. The cash retained will be applied towards funding of acquisition of one or two mid-sized chemical tankers and/or offshore support vessels at US$20m-30m each in the next six to 18 months. While no guidance is given on whether the distribution policy will be maintained at 70% going forward, we do not rule out the possibility that the trust may further reduce payout ratio should the need arise to fund acquisitions. That said, we view this positively as ship prices have fallen sharply from their peaks in 2008. Accretive acquisitions may drive a re-rating of the stock.
In view of the change in distribution policy from 90% to 70%, we reduce our DPU forecasts for 2009-11 by 5-22%. PST has no loan-to-value covenants in its loan documents. All loans are amortised. Its current net gearing stands at 89%, the lowest among the shipping trusts. We forecast 2009 and 2010 dividend yield of 12.7% and 10.0% respectively after adjusting for the reduced distribution payout ratio. Maintain BUY with target price of US$0.37 based on 2010 P/B of 0.9x, higher than the P/B ascribed to the other two shipping trusts given PST’s stronger financial position.
Click here for more Offshore Marine Stocks Technical Analysis
Sponsored Links
Comments
No response to “Pacific Shipping Trust - 2Q09: Retaining cash for acquisitions”
Post Comments (Atom)
Post a Comment |
Post a Comment