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Global Ship Lease, Inc. Message Board

  • klein1028 klein1028 Nov 21, 2011 6:39 PM Flag

    DHT vs GSL

    I would like to get different opinions on the investment in DHT with a current dividend and seemly conserative financial profile. Thanks

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    • DHT has charters that are expiring in 2012 and I expect the rates for them to decrease. With that said, DHT to maintain paying a dividend, voluntarily paid the principal of its loan in advance to keep its LTV above 130%, which in turn if applied in the past, pays the principal through 2013 or early 2014. Thus, its largest loan balance is interest only until then.

      Currently, it is earning about $10 MM per quarter, but in the 4th quarter it may have less income due to dry docking of vessels. I expect the income to drop by about $1.5 MM per quarter per charter if rates don't improve by the 2nd quarter of 2012.

      One factor that may play into the VLCC market in 2013 or 2014, is if Canada redirects the oil that was to come to the U.S. by the pipeline that was delayed to its west coast and on to China. That route, of course will require shipping of the crude.

      One other risk factor on DHT is the value of the tanker ships. If they continue to drop by significant amounts, DHT will need to continue paying cash to keep the LTV at appropriate levels. I believe they can do that for the foreseeable future, but it is a risk.

      I own both DHT and GSL. I've added a little DHT at these prices, because I think it may be close to the bottom, and, I sold part of my GSL at higher prices, and, expect to repurchase when GSL shows it has bottomed. Another shipper you might consider is ESEA, it runs both bulkers and containers, with low debt levels and substantial insider ownership. It is still paying dividends as well.

    • looks interesting, but obviously your making a giant bet on the forward curve for VLCC charters. I think many of us are here b/c of the long-term contract nature of GSL's charters which creates highly visible cash flows. Not to say that you can't do well guessing at the VLCC forward curve, but it requires a forecasting skill that I certainly do not possess....

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