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No. of Recommendations: 7
I follow shipping. But mostly, tankers and dry bulk shipping.

I have not followed container shipping as closely. At least, not as seriously, until the last few months. I was aware of the container shipping's tiered structure. So, this tiered structure is two-fold. The Top 10-12 container companies control almost all the container shipping on the major routes, and among that Top 12 are further groupings into Alliances (similar to airlines). The Top 10 players include companies such as Maersk, CMA CGM, Mediterranean Shipping Company (MSC), Cosco, Evergreen, etc.

The next tier is container shipping companies with reasonable sized fleets (40 - 100 vessels), who basically rent their vessels to those major players. So, these are the Atlas (ATCO), Costamare (CMRE), SFL corp (SFL), Danaos Corp (DAC), Global Ship Lease (GSL). Each company will typically rent or lease their vessels to multiple players among the Top 10. The first three names on the list i.e. ATCO, CMRE and SFL have longer term relationships with the Top 10 players, and this translates to longer term charters. Longer term, stable revenue is obviously a positive. That is, until Covid and post-Covid. The container shipping companies that stand to benefit, besides the Top 10 players obviously, are any of the smaller players, but with an added caveat. The smaller companies need to have some/many vessels rolling off charters so they can take advantage one of two ways.
1. The smaller company can sell the charter-free vessel to a Top 10 player at a significant mark-up e.g. CPLP
2. Fix their charter-free vessel on 1-year, 2-year, 3-year charters at 2X - 4X the previous rate.

With the criteria of container-company-with-vessels-rolling-off-charters, two names, publicly-traded, that come to mind are Global Ship Lease (GSL) and Danaos Corp (DAC). I nibbled on GSL today.
Here's why
1. Revenue growth:
At the start of 2021, GSL had a fleet of 43 vessels. Three acquisition deals during the first half of 2021 have increased the fleet to 66 vessels. GSL has also benefited from organic revenue growth via vessels rolling off charters, and renewed at higher charter rates. And will further benefit from additional vessels rolling off charters, including some of their 2021 fleet additions.

2. Capital structure:
At the start of the 2021, GSL had bank debt, two flavors of senior Notes, and two flavors of preferred shares. During Q1 2021, one flavor of senior Notes (2022 Senior Notes) got paid off, or converted to bank debt. Also, one flavor of preferred shares got converted to common equity. GSL have an ATM-offering type structure for both their remaining Senior Notes and their preferred shares. GSL have periodically been tapping these resources. But, the flip side to this, GSL have grown their vessel count by 50%, with many of the vessels offering better-than-average revenue streams

3. Credit rating:
Last week, credit rating agency Moody's upgraded GSL's credit rating from B2 to B1. That was the second credit rating upgrade in 2021. GSL have managed to arrange financing for 20-yo vessels (first acquisition of 2021 was seven older vessels from Maersk, with run-off charters). This occurred prior to the rating upgrade.


I have seen a GSL Net Asset Value (NAV) suggested on SeekingAlpha that the company trades around 55% of book. I'm working on my own estimate. But this is tricky, given the fleet and age mix with a mostly 2nd hand fleet, and existing price volatility.
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