A look into Rickmers Maritime – Is it too late?

As I was thinking about ways to increase my dividend yield, Rickmers came into my mind. All along, I knew this company was giving out 10%+ dividend yield, but something always stops me when considering to purchase it. Today, I decided to find out more about this company.

Business Overview

Rickmers Maritime is a Singapore business trust which owns and operates containerships under long-term fixed-rate time charters to leading container liner companies.

Distribution & Distribution Policy

Distribution History

So Rickmers has been consistently giving out US$0.006 quarterly as dividend from 2011. Consistency-wise, it’s excellent. Dividend yield stands at 10%+ without much change from the share price, which hovers from about 0.27 to 0.30.

Dsitribution Policy

So basically, Rickmers is able to give out a maximum of US$0.006 quarterly up till 31 Dec 2015 or whenever it chooses to end it. To me, this means that there’s only 1 more year till things get ugly. (Both in terms of dividend yield and share price)

My concern would be Rickmer’s ability to give out such dividend yield beyond 2015. However, this means that at least for a year, I can still get to enjoy good dividends out of it.

Rickmers has largely been known by me (and maybe many others) for it’s dividend yield. Without it’s 10%+ dividend yield, does it have value to it? And if so, what’s it’s worth without the high yield?

Financials

When it comes to Rickmers financials, I question myself if I want Rickmers in my portfolio for the long-term.

Financials

My areas of concerns are:

  1. Decreasing Total Assets
  2. Poor Growth in Cash Flows
  3. Decreasing ROE
  4. Spike in Average Day Payable
  5. Over-leveraged

Total Assets

Total Assets Chart

As an investor, this is something I do not like because the first thing that comes to my mind is that this business is not growing. It’s basically a shrinking business. Why would I want to buy a business that’s shrinking?

Cash Flows

Operations to Net Change in Cash

Cash flow from operations is decreasing year after year. If I’m out to create a dividend portfolio, Rickmers’ cash flow is telling me that it’s ability to generate cash flow has been weakening and will continue to weaken until a catalytic action comes in.

Operations to Financing

The only reason why the net change in cash is increasing(and it’s not even by a lot) is because financing has been decreasing.

Decreasing ROE

ROE to Common Stock

Since ROE is defined by: Net Income/Shareholder’s Equity, this shows me that the management has troubles utilising shareholder’s equity effectively and any further rights issue will further erode ROE. The only way to improve ROE would be to increase Net Income, which is currently experiencing a downhill battle.

ROE to Net Income

Spike in Average Day Payable

Avg Day Payable

It’s usually quite low, but the spike to 43 days shocked me a little bit. I’m not exactly sure whether to take this as a good or a bad thing, but I thought it’ll be important to highlight it out.

Over-leveraged

Gearing

Debt levels

The reducing gearing ratio is the only consolation I find in this company. The only way this company can make a good turn-around in my opinion is to generate good net profit to pay off their debt.

Rights issued in past

Issuing new shares easily does the job of shaving off 10% as seen in the gearing ratio. However, we must remember that the company’s ROE doesn’t have a good track record and this only destroys the value of the company.

Outlook of Rickmers

Vessels charted

It’s 2 main clients currently are CMA CGM and MOL. The question that comes to my mind is “What happens after 2015?” Will Rickmers be able to secure another big client for 2016?

Vessels

Looking at the vessels 10/16 of the ships are built 2007 and before. Beyond 2009, there hasn’t been anymore purchase of ships. I ask myself “Why?” Now I have 2 concerns:

  1. Company doesn’t have enough business, thus no need for so many ships?
  2. When are they no longer deemed safe to be chartered out? Possibility of seeing huge cash outflow when the ships need to be renewed.

Insider Trades

Insider Trades

Rights were issued in 2013 at 0.240, thus the huge subscription of it at that price. However, in 2014, Director Lim How Teck sold off 600 lots at 0.290. Although he’s not a very big shareholder, but as a Director, his confidence of Rickmers was probably somewhere near 0.290. Trading range of Rickmers to me would be 0.240-0.290 if I were to invest in it.

Concluding

Rickmers is a shrinking and debt-laden business and it needs a catalyst to see further upside. It used to be a really good company to invest in for dividend yield back in 2010. But I would not invest in Rickmers beyond 2015 for it’s dividend yield now. Therefore, I think it could be a little too late. With only a year left and so much to settle, I’ll watch this ship float by me for now.

Advertisements

5 thoughts on “A look into Rickmers Maritime – Is it too late?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s