Monday, October 28, 2013

Rickmers Maritime : 3Q13 earnings higher due to reduction in finance expense (S&P)

Rickmers Maritime
Price: SGD0.29 Date: October 24, 2013

Results Review
3Q13 earnings higher due to reduction in finance expense. Rickmers Maritime (RMT) reported 3Q13 revenue of USD36.6 mln (+0.8% YoY) and net profit of USD13.1 mln (+59.0% YoY). Profit was higher than we expected due to the expiry of four interest rate swaps resulting in interest savings.

Operating profit growth was flat. Both revenue and operating expense were relatively flat, with vessel utilization staying high at 99.9%.

Deleveraging continued. Finance expenses decreased by 44.6% YoY due to interest expense savings as a result of the expiry of four interest rate swap contracts and lower outstanding bank loans. The existing interest rate swaps are fixed from 3.5% to 4.99% p.a., higher than the current floating rate on its loan (LIBOR + 1.75%). RMT continues to deleverage by repaying USD113.8 mln of loans year-todate ended September 2013. Most of the net proceeds from its rights issue were used to repay bank loans. As a result, net gearing level has dropped to 49% at end-3Q13 from 59% at end-2012.

DPU unchanged. Distribution per unit (DPU) of US0.60 cents for 3Q13 is unchanged. RMT has committed to a dividend payout of US0.60 cents per quarter throughout 2013.

Earnings Outlook / Estimates Revision
We increase our 2013 and 2014 earnings estimates by 14% as we cut our finance expense assumption given the expiry of its interest rate swap and the continued low interest rate environment. We assume management will not undertake any new interest rate swaps in 2014 and all the existing swaps will mature before July 1, 2015.

We expect excess ship capacity to remain a drag on container freight rates with recovery anticipated toward end-2014 as demand starts to outstrip capacity growth. We expect charter rates to increase moderately in 2014, but remain below the existing rate enjoyed by RMT currently. We factor this risk into RMT’s earnings estimate by assuming lower rechartering rate for its five vessels upon expiry throughout 2014. As a result, we expect DPU in 2014 to be lower (US 1.6 cents) as compared to 2013.

Investment Risks
Key investment risks include: (i) rechartering prospect of five vessels throughout 2014; (ii) charter counter-party default risk that may adversely affect RMT’s cashflows. However, we see a low rate of renegotiation/default risk from RMT’s clients, given that the clients are established and reputable global liner shipping companies with a track record of timely payments; (iii) higher interest rate and (iv) additional DPU cut in 2014 due to chartering market weakness.

Source/Extract/Excerpts/来源/转贴/摘录: S&P Capital IQ Equity Research
Publish date: 24/10/13

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