(From Article)
I fell to the trap of Rickmers high dividend yield and now ended with 1 for 1 rights issue at 0.24 cents.
Since investors are probably in this for income, what about DPU?
As this is a 1 for 1 rights issue, the number of units in issue will double.
Since the proceeds are not used to fund yield accretive activities, DPU logically should reduce by half.
However, in this case, it will stay unchanged at 0.6 US cent per quarter for FY2013 as RMT will double its income distribution to unit holders.
Therefore, it is not that the Trust is generating twice as much income as before, it is simply paying out twice as much as before with the same level of income!
A few of the charters will be expiring in 2014 and chances are for rates to reduce.
Why?
The charters are locked in at rates of above US$25,000 a day which is at least 3 times more than current spot rates for similar vessels!
This is why RMT only made mention of DPU maintaining at 0.6 US cent per quarter for FY2013.
There is a chance and a high one that DPU will reduce in FY2014.
Thus, as an investment for income, beyond FY2013, RMT does not inspire much confidence.
As an investment for growth, RMT simply does not make the cut.
If there is one good reason to invest in RMT, it is its NAV/unit of US$0.50 (S$0.60), post rights issue.
Paying S$0.30 per unit, simplistically, investors will be buying container ships at half price!
Unless they are corporate raiders, however, this fact is most probably only of academic interest to these investors.
Share price falls to 0.285 on 3May2013.
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