Pacific Shipping Trust (PST)

[tonylim]

Hi Nick,

1)I think for revenues in USD , unitholders will continue to receive less because of the weak USD, but for asset value it won't make any difference because overtime, asset value will be adjusted accordingly to the equivalent of S$. Just like oil or other commodities, USD go up , oil price come down, vice versa.
I sold 15% of my holding of PST @0.365 because I was more concern on the right issue then.

2)What is your take on SABANA reit, the yield of more than 9% is too tempting , moreover property assets are always a better asset class than vessels as perceived by many.

[Nick]

Hi Tony,

1) Granted, the asset value will be revalued accordingly to reflect the charter-free valuation if need be. But this wouldn't impact the cash-flow derived from its long term charters. The stability behind a trust structure can be a double edged sword. The recent charter contracts are 8-10 years in length with fixed rates. If the USD keeps depreciating at 5% per annum, the real DPU will drop significantly after a few years ! I think trusts are valued by their expected cash-flow rather than their RNAV so the unit price will reflect the DPU values. I might be wrong but I think this is a very big risk for a non-US investor. I was hoping they got paid in RMB from Cosco and Shagang instead but that isn't the case ! I guess they can mitigate this when they get new leases for the existing fleet in 3-5 years time.

2) It is interesting to see the 2 small cap industrial REITs (AIMS and CIT) trading at double digit yield. In other words, the market places a greater risk premium on these 2 reits as opposed to the shipping trust. Industrial assets are cyclical too unlike retail properties and they lack the organic growth exhibited in hospitality reits. I have not looked at Sabana in detail so I cannot comment. But judging by its peers, it does seems that a 9% yield is quite normal for it.

[tonylim]

Hi Nick,

For shipping industries, all quoted in USD, be it freifgt rate , charter rate , same as many other commodities.
Hope one day these businesses will abandon the tie with USD., But USA is still the biggest trading partners of many countires, so may not be that soon.

[Nick]

A very short analysis from DMG on the latest financing deal:

Pacific Shipping Trust: Update on Pacific Shipping Trust’s financing for recent acquisitions (SGXNET)

Tan Chee How (6232 3894, chee-how.tan@dmgaps.com.sg)
Terence Wong, CFA (6232 3896, terence.wong@dmgaps.com.sg)

The news: Pacific Shipping Trust (PST) has secured bilateral financing commitments for a total of US$132m from OCBC, Standard Chartered Bank and ING Bank to fund its purchase, announced on 26 Nov 2010, of five new 57k DWT Supramax Bulk Carriers. These new vessels have been time-chartered to Glovis Co Ltd, Korea for periods of eight and 10 years respectively.

Our thoughts: The latest bank lending has come on the back of the bilateral loans of US$150m granted by DBS, Maybank, and Bangkok Bank in Nov 2010. Including the latest loan, PST has been boosted with US$282m of loan to finance acquisitions of vessels. As a result, PST does not need to raise new equity for the immediate future. The latest lending proves that banks are now more willing to lend money to shipping trusts, which require continuous funding to grow its fleet size. Hence, the latest piece of news is positive for shipping trusts in general as their acquisition war chests will be boosted. We do not have rating on PST currently which is trading at 7.4x Bloomberg consensus FY11 EV/EBITDA. This is in-line with First Ship Lease Trust’s 7.3x and a premium to Rickmer Maritime Trust’s 6.3x.

http://www.remisiers.org/cms_images/18_M...atters.pdf

(Not Vested)

[Nick]

PACIFIC SHIPPING TRUST CONTINUES TO PERFORM WELL IN Q1 FY2011

• Net Profit after Tax increased by 4% in Q1 FY2011
• Distribution per unit (“DPU”) increased by 2% to 0.809 US cent for Q1 FY2011
• Diversified fleet portfolio of 21 vessels comprising 12 existing containerships and nine new capesizes, bulk carriers and multi- purpose vessels under construction
• Financing for the nine new vessels have been secured
• Contracted charter revenue profile extending up to FY2023

http://info.sgx.com/webcoranncatth.nsf/V...600383668/$file/PST_Q1FY2011_PR.pdf?openelement [Press Release]

http://info.sgx.com/webcoranncatth.nsf/V...60037B143/$file/PST_Q1FY2011_Results.pdf?openelement [SGX Announcement]

PST continues to provide stable distributions to its unit-holders while maintaining a conservative capital structure by using cash-flow from depreciation to repay its long term loans monthly. These loans do not have LTV covenants which plagued the likes of RMT and FSLT. PST has also secured financing for its 9 newbuilding vessels and should receive delivery of the 2 Capesive vessels in 2H 2011. This will give a timely boost to DPU. While PST did retain US$1.9 million for capex this quarter, I do expect it to raise equity next year to reduce its gearing post-delivery. The depreciating USD should also be a cause of concern for local investors since both the unit price and distributions are in US$.

(Not Vested)

[Nick]

PACIFIC SHIPPING TRUST Q2 FY2011 DPU UP 2% AGAINST Q2 FY2010

• Profit after Tax increased by 3% in H1 FY2011 against H1 FY2010
• Distribution per Unit (“DPU”) of 0.809 US cent with annualised yield of 8.9%
• Delivery of two capesize bulk carriers in September 2011 expected to generate positive returns starting Q4 FY2011
• Diversified fleet portfolio of 21 vessels comprising 12 existing containerships and nine new capesizes, supramax bulk carriers and multi-purpose vessels under construction

http://info.sgx.com/webcoranncatth.nsf/V...3003403BB/$file/PST_Q2FY2011_Results.pdf?openelement [SGX Announcement]

http://info.sgx.com/webcoranncatth.nsf/V...30034969F/$file/PST_Q2FY2011_PR.pdf?openelement [Press Release]

PST continues to generate stable and sustainable distribution to unit-holders. The DPU of 0.809 US cents represents 70% of the Trust's net profit which is in line with their guidance. The Trust retained US$1.9 mil of earnings in 2Q 2011. Unit-holder's equity rose to a new high at US$249 mil. The 2 X Capesize vessels leased to Shagang will be delivered in Sept - Oct 2011 which will have a positive impact to the 2H 2011 DPU. Personally, the major negative point is the appreciating SGD which depreciates the capital value of the unit and the DPU.

PST trades at 8.9% yield (annualized) and PER of 7.8.

(Not Vested)

[Nick]

PACIFIC SHIPPING TRUST TAKES DELIVERY OF ITS FIRST 180,000 DWT CAPESIZE BULK CARRIER

http://info.sgx.com/webcoranncatth.nsf/V...200518512/$file/PST_PR_060911.pdf?openelement [SGX Announcement]

PST fleet will grow to 13 vessels with 8 outstanding newbuilding vessels. Its charterer base will increase to 3 - CSAV, PIL and Shagang.

(Not Vested)

[karlmarx]

pst looks to be one of the best managed shipping company listed on sgx.

they currently have contracts for their new dry bulks to maintain their revenue for the next 10 years, at rates which are well above current spot market.

however, their older container ships which will have their contracts expiring within the next 2-3 years, will probably have more difficulty getting jobs and at reasonable rates.

from the investor's point of view, present valuations seem fair. there is also currency risk from usd, which makes holding pst for the long-term (5 years) unpalatable. however, when yields are at 20% this would probably be a ciggy butt.

[Nick]

PACIFIC SHIPPING TRUST TAKES DELIVERY OF ITS SECOND 180,000 DWT CAPESIZE BULK CARRIER

Both Shagang vessels have been delivered and deployed and will be generating revenue in 3Q 2011 but the full impact will only be felt in 4Q 11. It is highly likely that PST will continue to maintain its 70% profit payout ratio (or approx 45% cash earnings ratio) to channel retained earnings to fund the equity portion of the Cosco and Glovis vessels due in 2012/13.

[Stocker]

This is one of the few that bucked against the trend lately.