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Global Ship Lease, Inc. Message Board

  • aharonlevy aharonlevy Dec 3, 2011 2:31 PM Flag

    Valuation metric(s)

    Just to build on my rambling prior post, I wonder what valuation metric is best to use for GSL and other container shippers. I was using age-adjusted enterprise value/TEU as a starting point; by that metric (using ~25 years as useful ship life, and very much back-of-the-envelope-ing it), GSL is roughly half the price of DCIX. You could say that DCIX's current 12% yield is an appropriate starting point for a discount rate, I guess, and then say that GSL is certainly undervalued if it resumes meaningful dividend payments in 2013.

    But then again, there are so many moving what if DCIX ups its div again? And is div rate appropriate to use as a discount rate, or should you take in other macro factors? Or an additional "uncertainty premium" (and if so, is it the same for both companies compared)? And is EV/TEU appropriate if there's not any predictable realization catalyst? And so forth.

    The standard response would be to do up a spreadsheet or equivalent to get different outcomes based on different variables. But would that spreadsheet be dispositive? Or merely descriptive?

    I realize this is probably not adding anything to the conversation here. I suspect most if not all of us have had these thoughts already, many likely in a more sophisticated and elegant form. But I just thought I'd highlight the great difficulties that arise (for me, anyway) in valuing even simple businesses like GSL.

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