Excellent write-up. But are you giving management enough credit for capital allocation - why would they enter into knowingly dilutive charters in 2026/2027...and isn't the variability in rates part of the upside? From my reading the first ships in their cycle don't deliver until 2029 - and buying ships during downcycles could be significantly accretive...can't really argue with your conclusion - guess its a bit of wait and see. Thanks for the analysis.
I thought I was giving management enough credit but maybe it didn´t come out that way :)
I believe they would enter into lower rate charters to extend the duration of the contracts, I have seen that happening many times in this industry.
As per the variability of the rates, that is more relevant for GSL´s clients which operate in the spot market but for GSL the contracts mitigates the upside of the rates...at least in the short-medium term.
I totally agree on your point on buying ships during downturn could be acreditive but the issue I see is related to rates dropping faster than ships acquisition price which would hurt ROIC and easily go below the cost of capital.
But I could be wrong.
The point is that the odds are against them and the upside is capped (approx. $48) while downside may be significant.
Your Monte Carlo approach to valuation really captures the risk skew here better than a single path DCF would. The fact that 74% of scenarios land below current price tells the whole story. What strikes me is how managment executed flawlessly on almost every controllabe variable but you're still passing. That discipline is rare and highlights why ciycle timing matters as much as operational excellence in this sector.
Excellent write-up. But are you giving management enough credit for capital allocation - why would they enter into knowingly dilutive charters in 2026/2027...and isn't the variability in rates part of the upside? From my reading the first ships in their cycle don't deliver until 2029 - and buying ships during downcycles could be significantly accretive...can't really argue with your conclusion - guess its a bit of wait and see. Thanks for the analysis.
Hi Joe,
Thanks for the thoughtful comments!
I thought I was giving management enough credit but maybe it didn´t come out that way :)
I believe they would enter into lower rate charters to extend the duration of the contracts, I have seen that happening many times in this industry.
As per the variability of the rates, that is more relevant for GSL´s clients which operate in the spot market but for GSL the contracts mitigates the upside of the rates...at least in the short-medium term.
I totally agree on your point on buying ships during downturn could be acreditive but the issue I see is related to rates dropping faster than ships acquisition price which would hurt ROIC and easily go below the cost of capital.
But I could be wrong.
The point is that the odds are against them and the upside is capped (approx. $48) while downside may be significant.
Your Monte Carlo approach to valuation really captures the risk skew here better than a single path DCF would. The fact that 74% of scenarios land below current price tells the whole story. What strikes me is how managment executed flawlessly on almost every controllabe variable but you're still passing. That discipline is rare and highlights why ciycle timing matters as much as operational excellence in this sector.