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FSL Trust: Acquisition.

Thursday, June 2, 2011

Nothing much has been happening to FSL Trust lately although its unit price has suffered from weakness. I suspect that the weakness of the US$ and the shipping sector as a whole could have been a dampener.

The latest news is an acquisition of a "Long Range II (LR2) product tanker from TORM Singapore, a wholly-owned subsidiary of TORM A/S for US$46 million ($56.7 million).... The transaction will be immediately cash flow accretive to the trust and will increase the trust’s total remaining contracted revenue to US$602 million, excluding extension options. The average remaining lease term of the trust’s portfolio will also remain at the current 6.8 years."

Will this be a positive catalyst enough to send its unit price higher?



8 comments:

Anonymous said...

Hi AK,

Do you know the story behind FSL's where one of the lesees decided to abandon two of its boats and FSL had to take it back. Did FSL recover sue to recover any money?

Jim

AK71 said...

Hi Jim,

I believe you are referring to 'Nika I' and 'Verona I'.

US$6 million cash which served as security deposits for contract fulfilment by the charterers had been released to FSL Trust upon the expiry of the stipulated default notice period.

Notice dated 14 July 2010.

Alan said...

Hi AK,

What do you think about the end of QE2 will affect the stocks market? especially REITs? Thanks

AK71 said...

Hi Alan,

Well, the question to ask is what did QE1 and QE2 do. They made credit readily available and cheaply too. So, when QE2 end, would credit become less readily available and more expensive at the same time?

Of course, how would this affect the Singapore stock market? The end of the QEs anywhere in the world could stave off inflationary pressures. It could mean seeing the stock market at lower valuations as the market reflects upon this new reality.

With regards to S-REITs, I do not think there would be any strong direct impact immediately. S-REITs have long term contracts with their tenants. Many have also refinanced and locked in lower interest rates in the last 12 to 18 months. Most are also conservatively geared.

I remain sanguine about the prospects of S-REITs in the next 12 to 24 months, especially industrial properties S-REITs.

Anonymous said...

Hi AK,

I believe you are right.

With all the claims of bareboat charters going through 'hell and high water' it was supposed to be rock solid revenue but yet the lessee could just default and just only lost their deposti without having to fork out more money to fulfill the contracted revenue. And I think FSL did not get anything else out of it.

I could be wrong but I thought it was a crappy job by the management.

But thanks for the info anyway.

Cheers.

Jim

AK71 said...

Hi Jim,

You are welcome. :)

I agree that the management could have done a better job although I must also say that shipping is probably rather challenging in terms of prospects right now with excess capacity all round.

Alan said...

Hi AK,

Thanks for making the effort to explain to a newbie like me. Appreciate it.

Thanks

AK71 said...

Hi Alan,

You are most welcome.

I did not share anything out of the ordinary and I hope it was useful in some way to you. :)

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