Rickmers Maritime Trust

[Nick]

the bigger point is this- for an aset manager to earn fees and create value the asset should be enhanced similar to what is done in good reits e.g CMT buying bugis junction or IMM at market value but creating strong value through asset enhancement (e.g increasing yield by more than 200bps in a few years), or the asset should have strong potential for capital appreciation because of scarcity e.g someone that bought an orchard road property during the asian crisis.

Hi nextwave,

I do appreciate your comments.

You brought up 1 key point - Managers should be able to tap on organic growth (by using a mixture of debt and internal cash-flow) to increase distributable income. In a REIT, this is achieved through asset enhancement schemes which will increase rental rates (and quality of the rental roll) and hence lead to higher valuation. In other words, regardless of assets, a good Manager will create value in the Trust through actions which will lead to higher distributions from the very same amount of equity shareholder's pumped in initially.

I agree with you entirely and a good Manager will employ such actions to grow the distributable income organically with time. However, I don't see how this cannot be achieved within a shipping trust. A shipping trust can easily retain a portion of its net profit to fund vessel acquisitions which in turn will increase its distributable income (slightly) with no new equity raised. This is similar to the asset enhancement scheme of a REIT which aims to increase its DPU with no new equity being raised. Using PST as an example, it used a portion of its retained earnings to acquire US$183 million worth of vessels without raising a single cent of new equity. I am certain PST shareholders will experience a slight rise in DPU and hence consider such actions value-adding. In other words, while a shipping trust cannot enhance the value of a single ship, it can tap on its capital and payout structure to enhance its own value organically.

Comfort has grown its earnings by retaining its income and acquiring such businesses (with licenses) in the global market slowly with time. It can't raise the value of an individual taxi but it can tap on its capital to purchase new cabs or acquire other cab business to grow its profits.

It has been a fruitful exchange. I guess it is best for us to agree to disagree haha ! I don't view shipping trust to be superior to a REIT investment or vice versa. Each has their own merits and demerits. Both the shipping trust and REIT purchase brutally volatile assets (properties and vessels) and lease them out to generate cash. Locally, it makes better sense to invest in a REIT since the market is more matured with blue chip companies. Shipping trust is still fairly new in SGX with only 3 companies whose NAV don't even exceed US$350 million. I think even AIMS REIT have a higher NAV !