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Behind The Idea: Global Ship Lease - Major Turnaround, Dividends Ahead

Published Wed, 09 Oct 2019 12:00:00 -0400 on Seeking Alpha

This article was selected to be shared with PRO+ subscribers, who also got 7 days' exclusive access to J Mintzmyer’s original Top Idea on Global Ship Lease (NYSE: GSL). Find out more about PRO+ here.
Seeking Alpha: Can you briefly summarize your bullish thesis for readers who may not have seen it yet?
J Mintzmyer: The bullish thesis is quite simple - GSL trades at a massive discount to its primary peers, Costamare (NYSE: CMRE) and Seaspan (NYSE: SSW), both in terms of price to adjusted NAV (40-70% discounts) and in terms of enterprise value to EBITDA (2 full turns lower). I believe the primary reason is the lack of a dividend and the secondary reason is the small market cap and reduced publicity. I expect dividends to return by mid-2020 and the recent equity raise both speeds up the likelihood of a near-term refinancing and also broadens the investor float. If GSL traded near peer comps, we could see $15-$20+ by YE2020. My 'fair value estimate' is actually much lower, at $12.00, reflecting discounts for timing and uncertainty.
I believe the primary mispricing of GSL is due to the lack of dividend. Retail investors tend to simply value these shipping names based upon their dividends and occasionally they will look at EPS. GSL burned a lot of investors back in 2015-2016 with their dividend elimination (which we had previously predicted), and the firm was sort of zombied out for a while until they concluded a transformative merger in late-2018. In early 2019, they... Read more