Nov. 19 at 7:30 PM
$GSL : I like almost everything about the company… except the future returns.
Management executed flawlessly. They locked in long-term charters at peak rates, used the Covid boom to delever from nearly
$1B to
$320M, avoided overpriced newbuilds, and kept costs tight. On today’s numbers, GSL screens cheap with strong FCF.
But when I model the next cycle, the picture changes. As the 2021–22 high-rate charters roll off into a market facing heavy new capacity, weaker mid-cycle day rates, and softer trade growth, GSL’s ROIC falls from high teens into mid-single digits. That’s at or below a reasonable 7–9% cost of capital for this sector.
A Monte Carlo using distributions for day rates, opex, and discount rates clusters fair value in the low
$20S, with a non-trivial tail that destroys equity in a harsh downcycle.
Great management; tough industry setup. Not enough margin of safety for me at current prices.
https://www.beatingthetide.com/p/gsl-deep-dive-stock-analysis-wrong-part-of-cycle-global-shipping-lease
