Global Ship Lease (GSL) has successfully navigated the slow recovery of the pandemic-fueled global shipping crisis. The company operates small to mid-sized cargo container ships and reports charters for many of its 65 vessels. The company is experiencing record revenues and is preparing for future growth in the global shipping arena. I rate the company as bullish.
Global Shipping Crisis
The global shipping market is undergoing an ongoing crisis. The pandemic has caused global shipping disruptions and supply chain shortages. The cost of shipping containers on cargo ships dramatically increased. The issue has contributed to overall inflation and caused supply shortages.
The lockdown had Americans at home holding stimulus cash and buying online. The global shipping scene was unable to meet demand amidst pandemic conditions. This series of events caused the price of container shipping to skyrocket. Revenues are at all-time highs for shipping companies, and this trend is expected to last until the shipping crisis has fully subsided. With the increased revenue, shipping companies are buying more ships and port space.
Global Ship Lease Financial Performance
GSL reported $138.6 million in Q3-2021 revenues, representing a 96% increase from the previous year’s same quarter. The company reported an operating income of $79.6 million and adjusted EBITDA of $72.7 million. Global Ship Lease’s stock price is up ~110% over the last twelve months. The company foresees the higher revenues to continue until the global crisis fully stabilizes. GSL recently announced a quarterly dividend increase to $0.375 cents.
Global Ship Lease Future Synergies
The company reports that supply chain disruptions at the macro level will experience uneven recovery, although the global issue is improving. Global Ship Lease has benefited from the higher cost of shipping and the fact that companies must sign charters at a fixed shipping price. Only the more financially well-off companies can keep up in the bidding wars for charter rates.
During these times of high revenues and operating income, Global Ship Lease has increased its fleet from 43 to 65 vessels. Its 43 ships currently have charters running through 2024. The company reported the addition of 48 new charters, amounting to $1.25 billion in contracted revenues.
GSL expects the global shipping crisis to stabilize and for the bidding wars on cargo containers to end. When this trend ends, the company’s revenues and financial performance will decrease somewhat. Global Ship Lease covers the different recovery scenarios and how its revenue will be affected. Until then, the company should continue to report increasing revenues.
Wall Street’s Take
Turning to Wall Street, Global Ship Lease has a Strong Buy rating based on three Buy ratings assigned in the last three months. The average Global Ship Lease price target of $33.33 implies 30.1% potential.
Conclusion
Global Ship Lease has profited from its navigation of the global shipping crisis. The company reported record revenues amidst bidding wars over container charters. Global Ship Lease used its operating income to buy 22 new vessels.
The company foresees the shipping crisis and bidding wars to subside and for charter rates to stabilize. GSL reports charters on many of its vessels through 2024. For now, I rate the company as bullish.
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