FSL Trust turns profitable after 10 quarters of losses

Debt has been declining.

Bareboat charters with fixed rates helped turn FSL Trust’s downward spiral in the other direction.

Maybank Kim-Eng met with the company’s management and learned that the trust turned profitable in 2Q14, to a PATMI of USD1.0m after 10 quarters of losses.

The trust turned profitable in 2Q14, to a PATMI of USD1.0m after 10 quarters of losses. Some 76% of its revenue was from bareboat charters with rates fixed for various periods of charter. The balance 24% was from short-term time charters and pooling arrangements. 

According to Maybank KE, it is in compliance with the relaxed covenant requirements of its lenders and could potentially meet its original covenants if market conditions continue to improve. FSL has been paying down its debt at a run rate of USD44m a year. 

Being asset-heavy, Maybank KE’s analysts expect the market to use FSL’s liquidation value as a floor for its unit price. If FSL can comply with its original VTL covenant of 125%, its fleet is probably worth about USD424m at market price. This implies FSL could theoretically be worth SGD0.181/share. Its fleet consists of seven containerships, 11 product tankers, two crude oil tankers and three chemical tankers.