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Singapore “Flyer” of the Week: First Ship Lease Trust

singapore flyerThis week’s Singapore “Flyer” is First Ship Lease Trust (SGX: D8DU). It surged 15% to close on Thursday at S$0.092.

First Ship Lease Trust, or FSL Trust, is a provider of leasing services on a long-term bareboat charter basis. It has a diversified portfolio of 23 modern and high-quality vessels, comprising seven containerships, 11 product tankers, three chemical tankers and two crude oil tankers.

This week, on Tuesday, the FSL Trust announced that it had disposed off two 15 year-old dry bulk vessels, MT Stella Fomalhaut and MT FSL Durban, which were loss-making for the full year. The vessels were sold for US$23.55 million, before commissions and transaction costs. The net proceeds from the disposal will be used to pare down debt and to reduce subsequent principal repayments in the two upcoming quarters.

As of 30th December 2013, the trust had US$377.5 million in bank loan while its cash balance stood at US$20.4 million. Even though the outstanding debt will still be considerably high post-disposal, it’s a step in the right direction.

Alan Hatton, Chief Executive Officer of FSL Trust Management Pte. Ltd., the trustee-manager of FSL Trust was upbeat. He commented, “We are very pleased to have been able to sell some of the Trust’s older tonnage at a price representative of the significant recent improvement in older vintage handymax valuations. The sales enable the Trust to conserve cash as it relieves the financial burden of imminent third special surveys and dry dockings in 1QFY2014. Furthermore, we have successfully negotiated with our Lenders to apply at least US$5 million of the sales proceeds to the US$44 million debt principle repayments due this year. The benefit of those combined savings significantly improve the cash outlook for the Trust in the near term.”

FSL Trust is currently trading around 0.2 times its historical book value.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.