Global Ship Leasing Revisited: An Update

| About: Global Ship (GSL)

Summary

Although GSL's common share price held steady, the company and container shipping sector, in general, continue to face stiff headwinds.

However, on a brighter note, its solitary preferred price appreciated by approximately two dollars.

Currently its preferred offers an attractive high risk/high reward yield, an investment requiring careful thought and due diligence before placing your bid..

Let's see how Global Ship Lease (NYSE:GSL) has performed since my last update on September 20, 2016, Lucrative Opportunities Present In Volatile Sectors Of The Economy: An Update.

Though I hope you will read the original linked article in full, my bottom line assessment of GSL and buy recommendation at the time were as follows:

As a preferred investor, my one and only concern is about the long-term viability of each of these companies, which will not be determined by their latest quarterly financial reports. The real bottom line of their ultimate success or failure rests upon external factors beyond their control. When, and if, the container carrier shipping rates improve sufficiently, and how quickly this happens will determine whether or not these companies ultimately survive. Frankly, neither I nor any of the experts have the answer. Yet, rates are slowly improving, and hopefully this trend will continue and accelerate. That's the best I have to offer. The linked article concerning the Hanjin Shipping bankruptcy says it all. I suggest you read it closely and form your own opinion, which is at least as good as mine.

However, according to this three-month update, it appears that the investors in the company's commons and preferred are betting the company will survive and prosper. I'm hoping they are correct.

Now let's see how GSL's commons have performed over the past quarter since I wrote the previous update.

It appears that over the past three months, GSL's share price movement had trended down until early November when it popped. On September 2, GSL traded at $1.74, and now it's priced at $1.78. That's an increase of $0.04. Encouraging, but considering the state of the container shipping sector, it still faces stiff headwinds.

Now let's compare GSL's share performance over the past three months to that of a number of its peers:

The above chart displays GSL's share price performance, which has been at the middle of its container shipping peers and equaled the performance of the S&P 500. Its peers: Seaspan Corp. (NYSE:SSW), Diana Containerships (NASDAQ:DCIX), Danaos Corporation (NYSE:DAC), Navios Maritime Partners (NYSE:NMM), and Costamare (NYSE:CMRE).

Now let's see how GSL's preferred GSL-B has fared during the past three months:

I'm pleased to announce that its preferred has even outperformed its commons, increasing in value by approximately $2.00/share.

Now for a little forward guidance

Consequently, since little has changed, I can do little more than restate the conclusion I had drawn three months past: As a preferred investor, my one and only concern is about the long-term viability of this company, which will not be determined by its latest quarterly financial report. The real bottom line of the ultimate success or failure rests upon external factors beyond its control. When, and if, the container carrier shipping rates improve sufficiently, and how quickly this happens will determine whether or not this company will ultimately survive. Frankly, neither I nor any of the experts have the answer. Yet, rates are slowly improving, and hopefully this trend will continue and accelerate. That's the best I have to offer.

However, according to this three-month update, it appears that the preferred investors are betting it will survive and prosper. I'm hoping they are correct. For those of you brave enough:

Currently, GSL-B at $20.20 is offering an effective yield of:

  • 2.1875/20.20 = 10.83% yield

Before you decide whether or not the effective yield offered is worth the risk, I urge that you do some serious due diligence and draw your own conclusion. This is certainly not a no-brainer investment.

Disclosure: I am/we are long CMRE-C, CMRE,D, SSW-G, GSL-B.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

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