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.
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.