- The pandemic has disrupted international trade, driving up the cost of shipping goods
- GSL is playing in an uncrowded shipping segment (mid size carriers) Earnings are forecast to grow 42.04% per year
- Charter rates have increased substantially since the start of the pandemic and GSL has fleet capacity opening up to take advantage of higher pricing
Global Ship Lease (GSL) is a containership owner, leasing ships to container shipping companies under industry-standard, fixed-rate time charters. The Company is a Marshall Islands Corporation, with offices in London and Athens, and has been listed on the New York Stock Exchange since August 15, 2008, under the ticker NYSE:GSL. They focus on mid-size and smaller containerships, the workhorses of the global fleet, which tend to serve the faster-growing non-Mainlane and intra-regional trades collectively representing over 70% of global containerized trade volumes.
Q4 Investor Presentation Highlights:
There is a lot to go through so some of the key things that stood out are highlighted below. The 2 key takeaways are that charter rates are increasing and GSL has fleet capacity freeing up to take advantage of these increased rates - which will lead to high revenue.
- Re-charter opportunities - 12 Ships coming open in balance of 2021 – this is great because it opens up opportunity to take advantage of higher charter rates in the coming months
- Charter Rate Increases – essentially GSL can charge more across the board for their ships. 207% for Post-Panamax: Feb. 2021 v. 2Q20-low¹ 338% for Panamax: Feb. 2021 v. 2Q20-low Av. Charter rate increase 184% for Feeders: Feb. 2021 v. 2Q20-low¹
Link is here: https://www.globalshiplease.com/static-files/1d42c2df-4936-48b8-9db8-91eca357fe5d
Essentially the PE and PEG ratio signals that GSL is undervalued.
- Let’s look at PE ratio GSL is undervalued when compared to the industry and market with a PE ratio of 6.1x compared to the US Shipping industry average 13.4x and to the US market 21.5x
- The PEG ratio is an indicator of a stock's true value. The PEG ratio builds upon the P/E ratio by factoring growth into the equation. GSL PEG Ratio is 0.1x which is great, a PEG of less than 1 is a good sign
Past Earnings Growth Analysis
GSL has become profitable over the past 5 years, growing earnings by 24% per year and it’s growth over the past year 115% is significant and will likely continue. This is a great sign
Analyst Price Targets:
- High $20.00
- Median $18.00
- Low $16.00
An ‘aggressive’ fight over containers is causing shipping costs to rocket by 300%
It will be interesting to see this play out but this will have positive impacts on GSL
Let’s highlight a few risks associated with GSL
- Debt Levels: GSL's debt to equity ratio has increased from 120.3% to 165.6% over the past 5 years. And a DTE ratio of 165% is considered high. The debt is also not well covered by operation cashflow and it’s coverage of interest payments on debt covered by earning is only 1.7x which isn’t great
- Shareholder Dilution: GSL Shareholders have been substantially diluted in the past year, with total shares outstanding growing by 103%. This usually isn’t a good sign, however it depends what they are using the raised capital from
Leadership is a key thing to look at when evaluating a company to invest in. Below is a brief summary of the CEO
- Webber has been Chief Executive Officer since August 2008. This is a decently long tenure, which is a good sign – the board and shareholder are happy with his leadership
- From 1979 to 1996, Mr. Webber worked for PriceWaterhouse, the last five years of which he was a partner. This is a strong background to have – working for a big 4 accounting firm, especially at the partner level.
- From 1996 to 2006 he was CFO and a director of CP Ships Limited – again strong background and understanding of financially managing a shipping company