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Wednesday, May 12, 2010

SSW/GSL: Container Shippers Showcase Stable Models; "Market" Coming Around

Per our mention of good news the other day, we expected our container shipping companies Seaspan (SSW) and Global Ship Lease (GSL) to bring no surprises with earnings reports this week. We are pleased to report that there were no material surprises for these predictable businesses with long duration assets. We don't have time to share nuances, but relay a handful of slides below from management earnings presentations.

For Global Ship Lease (GSL results/slides found here), revenue growth coupled with healthy growth in operating and cash earnings (both resulting from fleet expansion over the past year):

And, a similar story for Seaspan (SSW results/slides found here):

Seaspan's expected forward revenue growth assuming all goes to plan and modest additional financing is received (estimated at $140 million in 2Q11-2Q12):

Expected top-line growth translates into significant bottom-line improvement:

While company specific and macro risks remain, we continue to sleep well owning both businesses and see incremental upside for patient investors. We expect to win two ways over time: (1) potential multiple expansion as a slow global recovery continues and (2) potential dividend increases in 2011 or 2012 (reinstatement for GSL). We continue to believe it is unlikely that Seaspan's equity will remain at an implied 3-4 times 2012E distributable cash flow (on fully diluted basis). Certain brokerage houses -- part of the "Market" we refer to in our posts -- are coming around to this conclusion - from Google Finance today:

Happy investing,

Jeffrey Walkenhorst

Disclosure: long SSW, GSL.

© 2010 Jeffrey Walkenhorst
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