Wednesday, May 21, 2008

Pacific Shipping Trust

The various shipping trust stocks listed in STI continue to provide very good dividend yields. Are shipping trust stocks similar to REITS? In the case of REITS, what the trust holds are property and land that also has a leasehold (less than 99 years to freehold). Shipping Trusts however hold ships. Maybe that's why they warrant a much higher dividend yield. With DPU yields hovering around 10%, one can expect to earn back the inital capital in 10 years if there are no unforseen circumstances. See below for (extracted from another blog) the yield provided by these shipping trusts:

Shipping Trusts (non-REITs)



DPU ct




Assets Type

PacShipTr US$

Q1 : Mar-08





Shipping Trust

FSL Trust

Q1 : Mar-08





Shipping Trust


Q1 : Mar-08





Shipping Trust


  • All in US$ except for Rickmers and FSL Mkt Price (Yield Computed Using Latest Exchange Rate S$1.3613:US$1 fm Yahoo Finance)
  • FSL : Annualised DPU 10.36ct
  • FSL : SGX Annc (12-May-08) Quarterly DPU Forecast - Q208 US2.77ct ; Q308 US3.05ct
  • Rickmers : Annualised DPU 8.56ct
  • Rickmers : SGX Annc (5-May-08) Quarterly DPU Forecast (Pg 7) - US 2.25ct (Q308)

UOB Kayhian issued a Buy call on Pacific Shipping Trust recently:

Raising our forecasts for ship acquisitions. We are raising our earnings forecasts
for the acquisition of four new ships from Pacific Shipping Trust's (PST) sponsor
Pacific International Lines (PIL). Two of these ships are chartered back to PIL
for a term of eight years while the other two ships will be chartered to CSAV, the
largest liner shipping company in South America, for a term of five years. The
four new ships will expand PST's portfolio of vessels by 50% to 12 from its initial
fleet of eight ships (which are on remaining charters of 6-8 years). In total, the
four new vessels are expected to raise PST's total contracted revenue p.a. by
79% to US$61.9m. We raise our 2008 and 2009 earnings forecasts to US$14.0m
and US$17.8m for 2008 and 2009 respectively from US$13.9m and US$14.6m
respectively, and initiate our 2010 forecast at US$19.4m.

Acquisitions to be funded by debt, thus causing gearing to spike up. PST is
funding these new ships entirely by debt. We estimate PST's net gearing will rise
rapidly from 69% as of end-07 to 217% by end-08. However, we have assumed
an issue of new shares of 25% of total share capital in 2009 and 10% in 2010. If
the Singapore stock-market's weakness continues into 2009, a rights issue would
be more likely than a share placement. PST's net gearing is forecast to fall
below 100% by 2011. The trust has an acquisition target of US$200m p.a. Apart
from the four new ships that have been announced, we have not factored in
other ship acquisitions.

Despite issue of new shares in 2009 and 2010, DPU should still improve. Despite
our assumption of new share issues in 2009 and 2010, we expect DPU to improve
from 4.3 US cents in 2007 to 4.4 US cents in 2008 and 4.7 US cents in each of
2009 and 2010. These translate into DPU yields of 10.7-11.5% over the next
three years. We maintain our target price of US$0.50 for PST, based on a fair
value 2009 net yield of 9.5%. Maintain BUY

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