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Global Ship Lease Initiation report

Buy Global Ship Lease (GSL, MCap: $700M)

GSL is a past pick of mine. Search the group with the tag "GSL" and you'll see my frustrated attempts at trading this stock. The containership market turned down in 2022, and rates remained high throughout 2023 further hurting debt-laden companies. The current shipping disruptions and the prospect of Fed rate cuts should reverse this.

GSL is a value stock trading at 0.6x book with a dividend yield of 7.5%.

"Global Ship Lease is a leading independent owner of containerships with a diversified fleet of mid-sized and smaller containerships. Incorporated in the Marshall Islands, Global Ship Lease commenced operations in December 2007 with a business of owning and chartering out containerships under fixed-rate charters to top tier container liner companies. It was listed on the New York stock Exchange in August 2008.

As at September 30, 2023, Global Ship Lease owned 68 containerships ranging from 2,207 to 11,040 TEU, with an aggregate capacity of 375,406 TEU. 36 ships are wide-beam Post-Panamax.

As at September 30, 2023, the average remaining term of the Company’s charters, to the mid-point of redelivery, including options under the Company’s control and other than if a redelivery notice has been received, was 2.1 years on a TEU-weighted basis. Contracted revenue on the same basis was $1.81 billion. Contracted revenue was $2.23 billion, including options under charterers’ control and with latest redelivery date, representing a weighted average remaining term of 2.8 years".

Contracted revenue is $800-$860M per annum, of which at least 40% should flow to the bottom line.

Shipping is a cyclical business, so PE is not the most important metric. However, GSL is in the leasing business as much as the shipping business, and this forward visibility, low dividend payout ratio (17-20%), and ability to refinance debt at lower rates should help re-rate this stock higher when value makes a comeback.

Technically, the stock is in a long sideways consolidation. This is the third attempt to break above the upper Bollinger Band. The short-term traders may want to wait for a weekly close above $22.03 to signal that the consolidation is over.

Another approach would be to wait for the relative strength vs the SPY to turn up on the daily chart.

Or, just buy value and wait it out. That's my approach with this stock. This is a business I understand and consider low risk, so I have a higher allocation to it. Value investing will come back once the AI bubble bursts and fundamentals start to matter. I'm positioning for that.

Good Trading!


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