Excerpt from latest analyst reports.....


OCBC Investment Research underweights shipping trusts

Analyst - Meenal Kumar

OCBC Investment Research analyst Meenal Kumar (second from left) at a SIAS seminar with the management of shipping trusts. File photo by Leong Chan Teik

The three Singapore-listed shipping trusts reported a mix set of 3Q results. Only FSL Trust (FSLT) has given DPU guidance for 4Q09 (1.50 US cents, flat QoQ).

In our opinion, the other two trusts are not in a position to give much forward guidance because of ongoing issues. Pacific Shipping Trust continues discussions with charterer CSAV who has requested rate concessions.

Meanwhile, Rickmers Maritime is in talks with key stakeholders as it deals with a large debt load and a large contracted order book.

We maintain our UNDERWEIGHT rating on the sector and believe investors should limit their exposure to leveraged asset owners. Still, we like FSLT [BUY, Fair Value: S$0.72] as it has -

1) recently addressed its most immediate balance sheet concerns;
2) a diversified portfolio; and
3) the highest distributions visibility(relatively) for the next 12 months.

On the other extreme, we have a SELL rating on RMT [FV: S$0.16] driven by the complex challenges faced by the trust. In our opinion, a resolution here is: uncertain; likely to be time-consuming; and perhaps  significantly dilutive to unitholders.