FSL Trust: Secured time charter agreements worth up to US$61m for three of its vessels, comprising product tankers, FSL Hamburg and FSL Singapore, as well as crude oil tanker FSL Shanghai.
Rates for the two-year contracts reportedly come at rates significantly above the old rates and are anticipated to generate up to US$61m in revenue over the next three years, including options for extension.
Following a management change in Aug '13, the group exited the oversupplied dry bulk market, and saw a rise in spot tanker rates which benefitted nine out of its 23 vessels. The shipping trust also regained compliance with its loan covenants at end '14.
Since 4Q13, FSL swung from a quarterly net loss of US$42m to profit of US$5.1m. Gross leverage ratio has improved from 0.57x to 0.52x, supported with a growing cash pile of US$36.4m (+78%).
If market conditions improve, the trust may restore distributions, which would be a catalyst for a share price re-rating.
Share price may be further supported by share buybacks which has been occurring since Apr '15, between $0.14 and $0.189/share.
FSL is currently trading at 4.3x annualized 1Q15 P/E and 0.33x P/B.
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