First Ship Lease Trust (FSLT) reported a lower 1Q09 net profit of US$1.5m (1Q08: US$1.7m) but higher than that in 4Q08 (US$0.5m). Earnings came in higher than our expectations. The lower net profit was due to periodic interest expense and depreciation charges relating to the acquired vessels exceed lease rentals received.

Distribution per unit (DPU) for 1Q09 of 2.45 US cents will be distributed to unitholders. This represents 73% of total distributable cashflow. The retained cash has been applied towards a voluntary loan prepayment of US$4.0m. FSLT has also guided the same DPU amount for 2Q09.

FSLT has decided to apply the distribution reinvestment scheme (DRS) for 1Q09 in order to increase its scope of voluntary debt repayment. The issue price of the new units will be announced after the Book Closure Date of 29 April 2009, 5pm.

In view of the heightened risks arising from a prolonged credit crunch and an illiquid shipping asset market in 2009, we are maintaining HOLD recommendation on FSLT and our fair price of S$0.60 is currently under review.