Rickmers Martime (RMT) posted a net profit of US$5.2m for 2Q09 (-43% yoy; -53% qoq). The fall in earnings was mainly due to the provision of US$7.5m for asset impairment charged for a vessel (Maersk Djibouti) as the charterer, Maersk Line, may exercise an early termination option. The impairment also takes into account the likelihood of a fall in charter rates in 2010. Excluding the provision for impairment, 2Q09 earnings would be US$12.7m (+38% yoy; +15% qoq). According to management, this is the only vessel in RMT’s fleet that has an early termination option.
The trust’s income available for distribution amounts to US$19.6m (+42% yoy). RMT is paying DPU of 0.6 US cents, or 13% of distributable cash flow (1Q09: 46%). A reduction in its payout ratio is mainly to conserve cash for financial flexibility amid uncertainties in the container shipping market.
To date, RMT has a fleet of 16 containerships time chartered out for periods of between seven and 10 years. Three more 4,250-TEU newbuilds, contracted to Hanjin Shipping, are expected to join its fleet. Of these, two are scheduled for delivery in 2H09 and one in 1Q10. RMT is evaluating options for the funding of four 13,100-TEU container vessels worth US$712m to be chartered out to Maersk in 2H10. These vessels have secured 10-year charter contracts at a daily time charter rate of US$56,941. The trust is also seeking to re-finance a US$130m loan facility due in Apr 10.
While our fair price of S$0.76 is 30% above its current share price, we maintain our HOLD recommendation in view of RMT’s unfunded US$712m capex due in 2010. Our fair price is based on 2010 P/B of 0.4x, similar to US peer Danaos’ P/B of 0.4x as RMT would have a similarly very high gearing of 4.0x, assuming debt financing for US$712m capex.
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