BUY US$0.37
At a Glance
• 2Q11 DPU remains steady at 0.809 UScts per unit, payout amounts to ~71% of distributable cash flow
• Expect DPU growth from 4Q11 onwards
• Dividend yield remains attractive at >9%; maintain BUY with higher TP of US$0.44 as we roll over aluations to blended FY11/12 numbers
Comment on Results
Good start to the year. 2Q11 revenue of US$15.4m and operating profit of US$9.3m remained steady on a y-o-y and q-o-q basis, as the existing fleet of 12 container ships continued to generate predictable income levels. Net profit was up 2.3% to US$6.8m, as interest expenses decreased 6.3% on the back of PST’s regular debt repayment schedule. Thus, net distributable cash (after loan amortisation) for 2Q11 came in slightly higher at US$6.7m vs. US$6.5m in 2Q10. The Trust paid out 71% of distributable cash, which amounted to US$4.8m or 0.809 UScts per unit in 2Q11, a 2% increase y-o-y and flat q-o-q.
Outlook & Recommendation
DPU growth expected from 4Q11. To recap, PST has announced 3 separate acquisition deals in FY10 to drive growth and diversification of the fleet - two new Capesize bulk carriers for delivery in Sep 2011, 2 Multi Purpose vessels for delivery in Sep/Dec 2012 and 5 Supramax bulk carriers for delivery in Nov 2012 – Apr 2013. With the delivery of the bulk carriers in 4Q11, we expect DPU to be stronger, and project overall 5% DPU growth in FY11, followed by 19% DPU growth in FY12.
PST remains our top pick in the shipping trust sector. The Trust has secured a total of US$282m in bilateral financing commitments from six banks to finance the above deals, which implies a high debt-to-value ratio of close to 85% and signals the faith of lenders in PST’s ability to sustain cash flows. We remain positive on PST’s growth and capital management strategies and maintain our BUY call with a higher TP of US$0.44 as we roll over our valuations to blended FY11/12 numbers.
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