Rickmers Maritime, listed on SGX, is primarily involved in leasing ships to container shipping companies, a notoriously cyclical sector.

With an average contract length of nearly 8 years, the trust remains somewhat insulated from the boom and bust cycles and enjoys fairly stable cash flows. Even though Rickmers’ sensitivity to cyclicality is lower than shippers, the company trust does face risks due to financial leverage and a loan of US$130m due in 2010. Worldwide credit crunches could limit RMT’s fleet expansion plans or force the firm to issue dilutive equity. SIAS Research
have increased the fair value uncertainty rating to reflect the wide array of outcomes for the firm’s growth trajectory.

Stocks of Singapore shipping trusts are hammered by tightening credit markets and a global economic slowdown. But a reversal in those risk dynamics as an easing of a credit crisis filters through ultimately, a modest rebound in shipping trust stock price will be seen. Price rerating catalyst will be the duration of the credit crisis and economic recession. SIAS initiate coverage with a “Buy” call for RMT, in view of an oversold market.