GSL is Very Undervalued and Well Positioned to Take Advantage of Recent Global Shipping Turmoil

Summary 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 Company Overview 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 Financial Analysis 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 News An ‘aggressive’ fight over containers is causing shipping costs to rocket by 300% https://www.cnbc.com/2021/01/22/shipping-container-shortage-is-causing-shipping-costs-to-rise.html It will be interesting to see this play out but this will have positive impacts on GSL Potential Downsides 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 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

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GeorgeL88

Mar 8, 2021
· POSITION CLOSED

15.56%

Position Return %

12.98

Price When Posted

2.02

Position Return

GSL

Global Ship Lease Inc - Class A

24.47

0.00
0.00%
Current Price

GSL is Very Undervalued and Well Positioned to Take Advantage of Recent Global Shipping Turmoil

bullish

Summary

  • 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

Company Overview

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

 

Financial Analysis

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

News

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

Potential Downsides

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

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

 

 

 

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read-time
3 min

16.00

Target Price

6/ 10

Confidence

2-6 Months

Timeframe
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Earnings Release
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News
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SEC Filing
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