Current Price on 12th Apr 2013 = S$0.34
- Current Yield = 8.68%
- Price-to-book Ratio = 0.277
- Assets per unit = US$2.594
- Debt per unit = US$1.596 (including current liabilities)
- Gearing = 61.5%
I am analyzing this trust because of its recent rights announcement. They have announced for a One-for-One rights at S$0.24 in order to raise funds for repayment of its debts.
Rickmer Maritime has been trading at a very low price-to-book ratio because of its debts which is at a very high level. It has debts which are due this year and is trying to extend it which therefore has this rights issue. Assuming that its rights are fully taken up, here are the statistics.
- Current Yield = 10.18%
- Price-to-book Ratio = 0.396
- Assets per unit = US$1.297
- Debt per unit = US$0.702 (including current liabilities)
- Gearing = 54.1%
In my opinion, this looks like a high-risk, high return business trust. Its yield and NAV is something which cannot be matched by any other REITs and business trust. I am thinking of taking this risk and try to subscribe for additional units so as to lower my purchase price and therefore increase yield. But having an experience through K-REIT Asia (now Keppel REIT) where it is not fully subscribed and its price went below its rights price, (although it went up eventually) I think it will be pretty much the same for this as well.
I am parking some funds to see whether there is an opportunity to enter AFTER the rights exercise because there should be more clarity on the progress and whether it is successful or not.
I have done some quick study on the financial numbers, I won't take this risk based on current container rates condition.ReplyDelete
I cannot understand how they can afford to payout >8.68% dividends. The fact that they need to issue rights in order to raise funds and reduce debt is a red flag.ReplyDelete
It is true that this is a red flag. That's why it is trading at such a deep discount. Trading at a deep discount has reduced its risk to a certain level.
What I am thinking is that it will eventually be out of the woods when container rates increases and their capital values increases as well.
another rights issue next year ?