First Ship Lease Trust

[CY09]

Interestingly prices have fallen back to Feb 16 levels.of course FSL ops cash flow ability has deteriorated as well. For this fy, i am expecting ops cash flow of only 55 mil. However, this is more than sufficient to meet its interest payments

As for its debts due soon, i think it is likely to be renewed due to their current prompt repayment. However, i am also hoping they raise rights as current share price is rather cheap; but at the condition of not using any of its cash reserve to buy more ships

[Boon]

FY2016 Results:
 
Revenue (USD million):
FY2012 =106.107
FY2013 =  89.993
FY2014 =  93.414
FY2015 =106.583
FY2016 =  98.144
 
NPAT (USD million):
FY2012 = -   8.387
FY2013 = - 65.213
FY2014 =     4.051
FY2015 =   14.147
FY2016 = - 30.955  
 
(FY2016 NPAT was down due to non-cash impairment loss on vessels of 44.137 m).
 
EPS (USD cent) :
FY2012 = - 1.28
FY2013 = - 9.96
FY2014 =   0.62
FY2015 =   2.19
FY2016 = - 4.86
 
(FY2016 EPS was down due to non-cash impairment loss on vessels of 44.137 m).
 
OCF (USD million):  (OCF as % of Revenue)
FY2012 = 78.664      (74%)
FY2013 = 60.701      (67%)
FY2014 = 68.275      (73%)
FY2015 = 78.859      (74%)
FY2016 = 66.971      (68%)
 
(Consistently generated more than 60 m OCF each year over the last 5 years)
 
Cash & Cash Equivalent (USD million) :
FY2012 = 37.488
FY2013 = 20.367
FY2014 = 32.750
FY2015 = 28.834
FY2016 = 42.899
 
Debt (USD million) :
FY2012 = 430.218
FY2013 = 377.492
FY2014 = 317.642
FY2015 = 272.085
FY2016 = 222.313
 
(Debt is at 5-year LOW)
 
Interest Paid (USD million) :
FY2012 =  28.271
FY2013 =  23.411
FY2014 =  15.789
FY2015 =  11.497
FY2016 =    9.577
 
(Interest payment is at 5-year LOW)
 
(Acquisition) / Disposal of vessels  (USD million) :
FY2012 =     0.0
FY2013 =     0.0
FY2014 =  22.261
FY2015 = (22.054)
FY2016 =    9.593
 
DPU (SGD cent) :
FY2012 =    0.0
FY2013 =    0.0
FY2014 =    0.0
FY2015 =    0.0
FY2016 =    0.0
 
NAV (USD cent) :
FY2012 =   48
FY2013 =   41
FY2014 =   41
FY2015 =   44
FY2016 =   39     
 
Number of Shares issued:
FY2012 =  654,665,077
FY2013 =  654,665,077
FY2014 =  654,665,077
FY2015 =  637,456,577
FY2016 =  637,456,577
 
(Note: During FY2015, the Trust repurchased 17,208,500 units and these units were subsequently cancelled in the same year.)
 
Comments:
1)   Revenues over the past 5 years seemed to be range bound between 90 m ~ 106 m
2)   FY2016 NPAT / EPS were down due to non-cash impairment loss on vessels of 44.137 m
3)   However, ability to generate positive OCF remained strong. Over the past 5 years, the business has consistently been able to generate OCF in excess of USD 60 m per year (or on average of USD 64m per year or around USD 10 cent per share). As a result, substantial debt has been repaid, and interest expenses has come down substantially.
4)   By end of FY2017, debt level should be further reduced to around USD 160 m, IMO.
5)   Assuming the USD 160 m debt could be refinanced or rolled over at the end of this year for another 5 years - with yearly principal repayment of USD 32 m, and interest rate of say 5% per annum. This would mean USD 40 m (32 m for principal repayment + 8 m for interest payment) would be needed to service the loan in FY2018.
6)   If OCF generated could be maintained at above USD 60 m over the new tenure of the loan, in theory, it means more than USD 20 m, being the excess OCF generated, after servicing the loan, could be made available for distribution to unit-holders, should the TM agrees to it. This would translate into DPS of SGD 4.0 cents. Against the current share price of SGD 13 cents. It looks CHEAP…
7) Would TM board agree to it ? Ha-ha! That’s another story......
8) Point is: Don't have to fully pare down debt before restoring DPU ...............
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[Boon]

FSL GETS REFINANCING DONE IN TOUGH MARKET
https://www.marinemoneyoffshore.com/node/6784
 
6 years ago, they did it with a bigger loan (USD 479.6 m).
 
It should be relatively easier this time, I reckon, with a smaller loan size ( ~ < USD 200 m).

Besides, I believe the VTL ratio is higher this time.
_______________________________________________________________________________ 

[holymage]

FSL.. I used to own it as I bought into the free cash flow story. Made a mistake, but was lucky to exit without a loss.

There is no economic moat for ship chartering companies, perhaps economies of scale if one would insistent.

Nonetheless, one can still profit from ship chartering companies, if there is a tailwind from any supply/demand imbalances. Or should FSL is priced at a sufficiently high margin of safety, but valuation and risk would be key.

Those who bought into FSL are making the following assumptions, whether knowingly or unknowingly:
1a) Free cash flow will remain at $60m to $80m levels
2a) No further expenditures will be spent on acquiring new ships
3a) Refinancing will be successfully
4a) Dividends will be restored

The risk:
1b) Ship chartering rates for MR, LR2, Aframax rebounded and peaked in Aug 2015. It have since dropped substantially (at least 30% till today). This is the main reason why I liquidated my FSL position when I noticed the trend. I severely underestimated the single digit fleet growth. Most of FSL's leases will expire in mid-late 2017. I expect the OCF to dip substantially in 2018, unless there is an improvement in chartering rates.
2b) FSL vessels are currently 10 years old on average. Tankers have a working age of 25 to 30 years and worth lesser as it ages. FSL will definitely periodically renew the fleet to sustain its asset-based business. This is why the previous CEO, Alan Hatton bought a MR tanker. Hence, the depreciation is real and one should take into considering when computing FCF.
3b) Currently, banks are stressed due to the oil and gas, shipping, real estate etc. The fact that FSL is taking so long to refinance is showing how difficult it is to convince the banks. This is another big question mark.
4b) Given the tough operating conditions, I doubt FSL will issue dividends, not at least until they have successfully refinanced.

Still monitoring FSL.
Good luck to all those vested.

[lanoitar]

Back in 2Q16, FSL already had an offer for refinancing:

And yes, we have, if you like, term sheets on the table, but we're working with those banks to try and negotiate a better deal for the trust, I guessed. And we're still at the process of working out exactly where we can get to in terms of both the quantum of debt, profile, tenure; all kinds of diff things.

So yes we've had indicative term sheets and things. Have we accepted any of those at this stage? No, we continue to discuss what the debt should look like going forward. It's not something we're prepared to take the 1st deal on the table for.

Src: http://fsltrust.listedcompany.com/mediac...16_Q&A.mp3
[41m:48s]

The trust has also consistently communicated that the dividend will be resumed after the refinancing. I'm more keen that they resume the share buyback though, given the prices today.

Nonetheless, this is likely going to be a lousy year for tankers, and cash flow will be impacted with the high number of re-deliveries. Prospective investors will have to take a medium/longer term view.

[Boon]

Those who bought into FSL are making the following assumptions, whether knowingly or unknowingly:

1a) Free cash flow will remain at $60m to $80m levels

The risk:
1b) Ship chartering rates for MR, LR2, Aframax rebounded and peaked in Aug 2015. It have since dropped substantially (at least 30% till today). This is the main reason why I liquidated my FSL position when I noticed the trend. I severely underestimated the single digit fleet growth. Most of FSL's leases will expire in mid-late 2017. I expect the OCF to dip substantially in 2018, unless there is an improvement in chartering rates.

If you are talking about FCF (and not OCF) of USD 60 m to 80m, then that's way too high................

The high chartering rates in 2015 were "exceptions", and shouldn't be used as "norm" for projections.............

There are different views on the market outlook going forward and here is one..............one just have to do more scenario analysis including the pessimistic ones as well............

Current share price ~ 25% of BV, adequate MOS for some I suppose..............

Product tanker rates poised to turn the corner in 2017
Greg Miller, Senior Editor | 1 January 2017
http://fairplay.ihs.com/commerce/article...er-in-2017

“With refined products inventories likely destocked, and with both global oil demand and refining capacity additions likely to exceed 0.9–1 million bpd in 2017, we believe the corresponding increase in refined products tanker demand of around 5% should exceed the minimal levels of shipyard deliveries in 2017,” said Mavrinac..........................................

Mavrinac at Jefferies estimates that long range 2 (LR2) rates will average USD20,000/day this year, up 8% from 2016; LR1 rates will average USD16,000/day, up 9% from last year; and MR rates will average USD15,000/day, up 11% year on year. The caveat is that Marvrinac’s 2017 rate forecasts for LR2s, LR1s, and MRs are still down 34%, 36%, and 30% respectively from 2015 levels................

However, belief in this is not unanimous.......................



[Image: PRODUCT%20chart%201%20resized.jpg]

[Boon]

Charter rates have been under a bit of downward pressure so far this year compared to last year's rates ............. 

http://www.compassmar.com/reports/Compas...Report.pdf
 
Current tanker T/C rates (USD per day)  vs (2016 rates / Jefferies 2017 projection rate )
LR2         =  16,000   vs  (18,500 / 20,000)
LR1         =  14,000   vs  (14,700 / 16,000)
MR          =  13,000   vs  (13,500 / 15,000)
______________________________________________________________________________________________________

[slowandsteady]

Any buddies here did a rough estimation of the fleet valuation? Just wondering whether the valuations are even close to what is on the books, compared to the values that ships trade at in the market today.

[Boon]

Any buddies here did a rough estimation of the fleet valuation? Just wondering whether the valuations are even close to what is on the books, compared to the values that ships trade at in the market today.

This is approaching from the loan covenants perspective:

As at 31 Dec 2016:
FSL  has 22 vessels

Cash level ~ USD 43 m

L = the outstanding face value of the loan balance  = USD 223.2 m
 
The term loan facility was secured against a first priority mortgage over the Group’s 21 vessels (excluding FSL Osaka which was acquired in Dec 2015 for USD 21.8 m).
 
V = market value of 21 vessels (collateral)
 
Interest was charged at 2.8% + Libor in FY2016, implied VTL ratio = between 140% to 180%
 
V > 1.4 L but < 1.8 L ( i.e. between USD 312m to 402 m )
 
BV of 22 vessels (including FSL Osaka) = USD 427.5 m
 
Assuming BV of FSL Osaka =  market value of FSL Osaka = USD 20 m
 
Market value of 22 vessels ~ USD 332m (at least) to USD 422 m (against book value of USD 427.5 m)
_________________________________________________________________________________________
 
If refinancing were not successful, what would be the likely outcome?
 
Liquidation of the trust !!!!!!!!!!!!!!!!
 
If all 22 vessels could be sold for USD 332 m,
 
Surplus cash to unitholders = 332 (sales proceed) – 223.2 (loan principal repayment) – 10 (interest payment) + 43 (cash) = USD 142 m =  USD 22 cents per share = SGD 30 cents per share.
 
Against the current share price of SGD 13 cents. This is not a bad outcome at all, IMO.
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[kbl]

Good noon Boon san and everyone.

Liquidation of the trust - Banks in the front Q. If the banks FireSale the vessels How?

<Not a call to Buy or Sell>