Q1 2021 Global Ship Lease Inc Earnings Call
Good day and thank you for standing by welcome to the global ship lease first quarter 2021 earnings Conference call.
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And then what day of the conference over to your host today, Ian Webber Chief Executive Officer of Global ship lease. Please go ahead.
Thank you very much good morning, good afternoon, everybody and welcome to our first quarter 2021 earnings Conference call.
This would accompany today's presentation are available on our website.
W. Doffs global ship lease stopped com.
Slides two and three as usual remind you that today's call may include forward looking statements are based on current expectations and assumptions and all by that nature inherently uncertain and outside of the company's control.
Actual results may differ materially from these forward looking statements due to.
Many factors, including those described in the study called the section of the slide presentation.
We also draw your attention to the risk factors section of our most.
Recent annual report on form 20-F, which is from 2020 and was filed with the SEC on the 19th of March this year.
You can find the spa website full body surface.
All of our statements are qualified by these and other disclosures in our disclosures in our reports filed with the SEC.
And also undertake any duty to update forward looking statements.
For reconciliations of the moment GAAP rents from Samantha.
Some extra measures to which we will refer during this call to the most directly comparable measures calculated and presented in accordance with GAAP you should refer to the earnings release that we issued this morning, which is also available on our website.
As usual I'm joined by our executive Chairman, George you're very close.
Chief Financial Officer.
I'm, the Chief commercial officer from this day.
Roche will begin the call with some high level commentary and then I'll say from a current areas of focus and then Tassos, Tom and I will take you through our recent achievements quarterly results financials and the current market environment.
Which will be pleased to take your questions.
Turning now to slide four I'll pass the call it was a joke.
Thank you Ian and good morning, or good afternoon to you all.
Simply put this has been a great quarter.
It's been great for the industry in general.
It's been great for our line of customers and it's been great for global ship lease the.
The strong containership market momentum of late 'twenty or 'twenty has further accelerated in 2021.
Positioning the sector for levels of profitability not seen in many years.
No doubt you have seen the earnings guidance updates put out by the likes of musk.
Bordelaise equipment shortages and congestion in the Swiss channel have helped at the margins by tying up container ship capacity.
But the strong market is actually based on strong fundamentals.
Particularly for the sized segments with focus on.
We expect these fundamentals to be sustainable well beyond when some of the temporary factors eventually dissipate.
I will tell you more about shortly.
In line with our long standing strategy, we're taking advantage of the opportunity presented by this red Hot market to lock in upside for extended durations and to deliver sustainable and accretive contracted revenue and earnings growth.
She was the start of the year. We have concluded 11, new charters for terms ranging from 21 months to over four years, well not a decent fleet.
Adding over $280 million of contracted Cutler.
And we have contracted to purchase and are in the midst of taken delivery of seven ships all of which have charters attached.
We have also taken the opportunity to refinance at little over 330 million over 'twenty 'twenty two debt.
Pushing maturities out to 'twenty to 'twenty, six and reducing annual debt service by almost $20 million.
The rating agencies have clearly appreciated all of the above and have upgraded our credit ratings to be stable and b plus b too positive.
On the right of this slide you can see that we have grown our quarterly revenue to 73 million, our adjusted EBITDA to $44 7 million and our normalized net income to $17.8 million.
And we strongly believe that we're well positioned for further earnings growth both.
From looking in high charter.
And longer shot the terms on that.
Our existing ships and by continuing to grow selectively and Accretively.
When the bulk of all this we have declared a quarterly dividend of 25 cents per quarter.
We choose to be paid on June 30 to shareholders of record on May 24th.
This is more than double.
The 12 cents.
The quarter, we announced in January.
Since then we have agreed to purchase seven ships.
Total, which are already in our fleet and contributing to earnings.
And have added additional charter cover at higher rates for longer periods.
Basically we strongly believe in the sustainability of earnings and we're putting our money where I'm office.
If you're not there to slide five.
I'll give you a helicopter view will hit dynamics shaping our industry.
And explain to you why we believe this that the best is yet to come.
We all know that container shipping had a remarkable 2020, despite global volumes falling by 2% year on year.
So with volume is expected to grow in 2021 by almost 7% well in excess of supply growth.
It makes sense that the market continues to tighten and charter rates continues to strengthen.
And to be perfectly clear this volume growth figure represents the underlying demand for containerized freight to be moved.
Our expectation of the market tightening does not depend on factors like port delays and other such temporary.
Impacts of COVID-19.
The question is what happens next.
And he had I point you to the top chart on the left of this slide.
Which shows containerized demand growth forecast.
The dark Blue bus.
And supply growth forecasts, which are shown in two ways.
Baby Blue bus show supply growth for the global Containership fleet as a whole while the red bars show supply flow growth specifically for the mid size and smaller ships. We focus shown and these are the bus to look at.
Which as you can see is tiny.
An encouraging picture I hope you will agree, especially when you consider that shipyard slots are already pretty much food all the way into 'twenty 'twenty four.
And that the data shown here assumes zero scrapping.
So if anything.
It may even overstate supply growth.
That brings us to the ever growing pressure on the industry to decarbonize.
I mean, both from capital providers and other stakeholders, putting increasing emphasis on ESG.
And from our growing pipeline of regulations aimed at enforcing carbon reductions over the coming years.
As you will have read considerable work has been done on developing green fuels in propulsion technology.
And then a certain number of existing prospects being discussed.
But in reality it will be a number of years and many many billions of dollars before these fuels and crucially the energy chain and shoreside infrastructure required to support them.
Our in place at any meaningful commercial scale.
In the meantime, the only way that the industry can materially reduce emissions is to reduce speed full stop.
And this is exactly what is contemplated by the new I am or initiative E X I.
Which is expected to be implemented from January 1st 2023.
E X sight will effectively requires ships already on the water to meet the emission standards required of newly built ships.
A large portion of the global fleet will only be able to achieve this standard by slowing down.
And this is the interesting part.
If you speed ships up you increase effective capacity.
Some of them to carry more cargo.
As you can see from the chart at bottom left that's what the liner operators have been doing I supply has got tighter.
So what's happened.
If when actually E X sight forces ships to slow down.
The answer is that effective capacities reduced.
A rough rule of thumb is that reducing the average speed of the global fleet by one knot is equivalent to reducing effective capacity by 5% to 6%.
So long story short, we see today's capacity Crunch and the resulting high earnings continued for some time yet.
On that note I'll hand, the call over to Ian.
Thank you George.
Please turn to slide six one.
One of our principal objective is to deliver earnings growth.
From both smoking in higher rates for longer durations from her existing ships and from accretive acquisitions.
This first quarter, we've done boats with charter renewals I'm the agreed acquisition.
6000, Teu ships, bringing our total forward contracted cover.
True around $994 million spread over two six years.
As usual on this slide we show our contract cover in charter portfolio.
Blue balls for chances already in the price when we started 2021.
From a dark blue bar shows the 11, new charters that we've agreed since January the first.
As you can see.
Building on an already strong second half of 2020 rates have just got stronger and charter terms longer that's just cargill has progressed well.
We were pleased to have fixed I know you have a 20 year old two and a half thousand teu feeder vessel from the.
Tomorrow early in January this year at a little over $14000 a day.
Essentially higher from the prior charter, which was 8000 Boes a day.
But we've recently fixed her sister from New Yorker through mid 'twenty 'twenty pool at $20700 a day.
That should give you a sense of how the market is continuing through volume.
And it's by no means an outlier this fixture and.
In fact, the storm is replicated across all sorts of categories.
Those of you who have been with us for a while will recall that we acquired the GSL nicoletta and the GSL Kristin to 6800 Teu ships for about $13 million each back in early 2020.
We have now been fixed on multi year charters at rates north of $35000 a day $35000 a day.
Which should generate approximately $10 million of EBITA each per year.
Not from short to the purchase price of the vessels.
And we have another southern ships coming open in the balance of 2021 and more in 2022.
But as you can imagine.
We may likely have to wait until the very end of the current Chaucer's re delivery windows before we can redeploy the ships or extend them.
At higher rates in today's point supply environment, charterers will hang onto ships, especially.
Flow market rates for as long as they possibly can so that pushes you out so the ends of the re delivery.
In the middle of the slides with the names in Red you can see the southern shifts that we've contracted to purchase with the chances attached.
All of these ships were delivered in late April a little earlier than we were expecting on the remaining free will deliver later this quarter or early next.
If you're not turning to slide seven I'll recap why the seven ships that were welcoming them to our fleet.
Net attractive investments such a clear illustration of our value accretive growth strategy.
In short our third.
Lee.
On existing ships with charters attached or arrange in tandem with approaches which are immediately accretive to cash flows. This is as opposed to new buildings for which that can be a two or three year wait before the vessels come on line and the revenue and during which time the owner has to fund all or has all of the funding costs.
We expect these seven ships.
$29 million.
The EBIT.
We are risk averse secondly, we look for good returns right now from the gates on assets with low economic depreciation limited residual value risk and compelling upside potential.
Seven ships per bill perfectly.
They have at least three years of contract cover deliver a purchase price to EBIT from a multiple of approximately four times.
Net income and earnings per share up significantly.
And have good downside cover with scrap value alone equivalents or about 60% from the purchase price.
Thirdly, the ESG economic strength and our strategy are well aligned.
Our view is to take a full lifecycle approach from the carbon footprint from ships. This means considering the footprint associated with the building and recycling of chips as well as operating income.
We believe that it only makes sense to build new ships, when we and the industry in general know, how they're going to be powered on a sustainable basis until then and how have you factored to optimize and where possible extend the economic life of existing ships.
She was a sudden we've just agreed to book.
Firstly.
We look to stay flexible on that job, we aimed for attractive investment returns within five years or less allowing us to adjust our strategy to the evolving decarbonization environment.
Our aim is to position GSL to be legacy problem free.
With a strong cash position to be able to capitalized on next generation Green technologies, how has that proven out from mature over the coming decades.
With that I'll turn the call over its pencils to talk you through our financials.
Thank you Ian this has been a busy quarter with a significant number of moving basics in our financing costs. So we have summarized the key points for you on slide eight.
Revenue for the quarter was 73 million up from $70 9 million in first quarter 2020 'twenty.
Similarly, adjusted EBITDA was $44 7 million up from 40 million first quarter last year.
Normalized net income, which adjust for the one off items was up from $10 5 million to $17 8 million.
I would like to spend a moment on day, one off items. Firstly, we have remained very active with refinancings, most notably the 9.8 75 notes, which would you in 2022 and were replaced by five year facility with Haiping maturing 2026.
When taking the notes out we were obliged to pay a call premium of just under two 5%, which amounted to $5 8 million.
Furthermore, we had to write off the remaining deferred financing costs and original issue discount associated with the issuance of the notes back in 2017, resulting in noncash charges of $4 8 million.
In a partial refinancing repayment over the 10% junior debt associated with the Blue Ocean facility, we incurred the prepaid premium charge of $1 6 million.
And now they're one off is a non cash adjustment of $1 3 million associated with management still got awards in the quarter Pardon Me New awards for additional members of staff and part due to acceleration of existing awards as vesting criteria were met.
Now moving to the balance sheet items here there are volume points to highlight our cash position at March 31st 2021 was $162 7 million.
As I have alluded to a booth, we had successfully refinanced motto for 2022 maturity debt. All in we have refinanced 336 million pushing those maturities out to 2020 seek reducing annual debt service by about 19.8 medium and bringing down or blue.
In coastal the dip down from six 4% to 5.5 per cent.
Meantime, we have raised $43 7 million advanced secure pay per year to date under our ATM programs further increasing our flexibility.
Now for the seventh seats, we have contracted to purchase we have lined up financing of $64 2 million of which we have drawn down 32.1 million against the three seats delivered so far we are finalizing additional finance or $14 7 million, which we expect will be completed in the upcoming days.
The fourth street.
On the equity from we raised approximately $72 million of common equity back in January including the Green to this combined with the conversion of all our series C preferred to common shares from completion of the notes refinance and adjustments for the Saturday and safety program brings our share count at March 31st two.
<unk> thousand 21 to $36 3 million and.
And finally, just after the end of the quarter, we executed the non dilutive secondary offering for our common equity that materially increased the size of our free float and meaningfully diversify their shareholder base, which we believe materially improves the attractiveness liquidity any of the stability of our common stock for a growing group.
Of potential investors.
Passing over the detailed financial statement, which appear in full on slides nine through 11, I would now like to spend a little time on the EBITDA calculator slide Slide 12, which is intended to help you with your modeling.
The table on the left hand side is designed to allow you to plug in revenue assumptions for vessels coming open in 2020 demand in 2022.
Please note that given the strength of today's market. The open days for 2021 are based on the conservative assumption, but charters will only deliver seats with below market existing charters at the very end of the permitted windows as Ian mentioned before for 2022, we have reverted to water use.
On the assumption that seeps will redeliver in the median or between two.
On the right hand side, we have provided some reference rates I must emphasize that these are not forecasts and are simply intended to help you benchmark historical average rates and those prevailing at the end of April 2021.
I highlight that the laser based on three year charters as that term rather than the traditional six to 12 month fixture is more recently is that that is what is actually happening in the market.
On slide 13, now we give some pointers of capex spending.
One point of what the underlying is that four of the seven seats. We have contracted to purchase will be dry dock this year, either on delivery or within a few months.
The remaining three will normally be dry dock in 2025 or so.
Once again, the indicative cost provider not forecast based on cost we have historically and careful compatible seats.
I would now like to turn the call over to Tom for his review of the market.
Thanks Douglas.
So slide 14 is intended to highlight the ship sizes on which were focused which will help the subsequent slides in proper context.
So as you can see here, we're focused on midsize and smaller ships, which is shorthand for ships ranging from about 2000 Teu up to roughly 10000 Teu.
Top map on the left shows the deployment of a quote unquote, our sizes of ships ships under 10000 Teu.
Emphasizes their operational flexibility.
As you can see they deploy it pretty much everywhere.
The bottom that on the other hand shows where the big ships in other words those larger than 10000 Teu are deployed which tends to be the east West main lane or arterial trades, where the cargo volumes and crucially the shoreside infrastructure can support them.
And it's important to note that roughly 70% of global Containerized trade volumes are actually moved outside these main lanes.
In the north South regional and intermediate trades by ships like ours.
Turning now to slide 15, this slide shows supply side trends that tend to be a barometer of health for the sector.
The top chart shows idle capacity, which at the end of March was one in the hall per cent and has since fallen to below 1%.
This is pretty much full employment and explains why as George pointed out earlier the law.
Owner operators have had little choice, but to speed up their ships to trying to accommodate growing demand.
The bottom chart tells a similar story ship recycling or scrapping has been almost nonexistent container ships this year.
Why because the ships because the charter markets and earnings environment is so hot why scrap a ship if you can squeeze a few more millions of EBIT dollar assets.
So that's the baseline full employment with a global fleet.
Which sets us up nicely for the next slide slide 16.
Here you can see on the left for the various fleet science segments have grown over the last few years.
The segments, we're focused on those sitting in the red box have seen negligible or even negative fleet growth due to underinvestment.
The same phenomenon carries through to the child from the right, which shows the order book pipeline for deliveries through 2024.
The fleet segments in the Red box all segments have minimal order books as you can infer from the charge a flurry of ordering activity, but you would have read about has been heavily focused on the big ships above 10000 Teu in other words not on a sector, which we compete.
This explains why the order book to fleet ratios for all focus on core segments or two 7% from 0.6% respectively versus that for the overall order book as a whole a 15, 6%.
So what sort of lift on for earnings in the containership charter market for the answer to this please turn to the next slide slide 17.
And here a picture tells a thousand words and you can see fuel cells current levels and trajectory of charter rates for the various benchmark sizes and the liquid charter market.
These rates are based on indices. The six to 12 month charters, while the market is really shifting to a multi year flow because those tassels just mentioned, but the directionality on the narrative is effectively the same.
So all in all a fantastic market and on that high note I'll turn the call back to George to wrap up George.
Thanks, Tom.
Very briefly summarize and then we would be happy to take your questions guys.
And a very strong market, we have materially increased our contract cover in both duration and dollar amount how should we have signed and expect to continue shining charters with more attractive rates and longer durations, but have been available in the market for many many years.
Our balance sheet is in very good isn't very good place with substantial cash on hand and.
An improved credit rating Ashish, a proactive refinancings and demonstrable access to diverse capital sources on attractive terms.
We have an attractive fleet of high very her count meet.
Midsized post panamax and smaller container ships.
Which are well supported by supply side fundamentals.
Idle capacity in these classes is already essentially nonexistent.
Even with a global fleet Havent sped up in recent quarters.
The order book below 10000, Teu remains negligible with shipyard capacity discuss in the coming years and emissions regulation coming from early 2023.
We believe we'll shrink effective capacity as ships are forced to reduce speeds in order to achieve compliance.
The market is an excellent position with both freight rates and charter rates continuing upward.
Customers from the line of sector have reportedly very impressive results to date and how.
Provided.
I catch in guidance for the duration of the year.
To put the current market context.
Sport.
Market charter rates have tripled and quadrupled.
Since the lows at around this time last year.
And rather than being fixed for months charters are being agreed for multiyear terms.
The safety and welfare Weatherperson I, let's see and onshore remains our highest priority and is a central component of the EOG culture embedded in the way we do business.
We have delivered on our long held strategy priority of refinancing of our 9.8 75 notes and we've implemented and now declared a quarterly dividend at more than double the amount. We previously indicated due to our growth and the continuing strength of the market. We're in.
Intend to stay active in chartering ships at good rates as they come open and we will continue to actively evaluate and selectively act on accretive growth opportunities that meet our criteria.
With that I would be happy to take your questions.
As a reminder, if you'd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone.
To withdraw your question press the pound key.
Our first question comes from Randy <unk> with Jefferies.
Howdy gentlemen, how's it going.
Thank you.
Yeah, I can imagine, it's going pretty well I guess for the recently announced dividend you know I guess first how is that amount decided you know you increased it from 12 cents to <unk> 25 cents.
Any positive surprise here I.
I guess is this a fixed dividend for the foreseeable future or is this something you kind of continue to plan on growing on an annual basis, and then yeah How'd you get to that kind of 25 net number.
Yeah.
Yes of course.
Thanks for the question Brian.
We derived a number much in the same way as we derived 12 cents in the first price.
Box, obviously, we've taken into account developments in the last three months, we announced a 12% dividend back in January since then.
As you know we've agreed to acquire seven.
6000 Teu vessels forwards.
Revenue as we speak a little earlier than we were expecting and obviously not included in the 12%.
We've refinanced a bunch of debt counsel referred to which has reduced our net debt service significantly on an annual basis.
The charter market continues to improve significantly and we've been able to add.
Contract cover.
Not only are so higher rates, but crucially in the context of sustainable cash.
Cash flows are for longer durations.
And we continue to see a fundamentally from.
The mentally supported markets on the supply demand side has been sort of in our prepared remarks decent demand growth limited supply growth.
I know you told in our resource categories.
Crunching the numbers.
Led us to reassess the 25 cents was a sustainable dividend.
And the likes of.
How we've approached setting the dividend, we should return that capital to.
To investors.
It's worth noting that we retain substantial investment capacity.
Sir please nobody think but we've given up on growth on that forward. We're returning capital to investors, we see plenty of growth opportunities there as well.
And we have capital to execute upon.
From them.
Yes, we do see this as a fixed dividend, it's not a special dividend, it's not a one off.
We expect it to be recurring on a quarterly basis.
We'll keep it under review as.
As the business develops as hopefully we're able to add additional vessels on an accretive basis to get to the GSL fleet Wow, we can look at increasing the dividend.
The indications all but that's the right thing to do.
I think I've covered everything if not then.
No that was good I guess you segue into my next question.
Obviously following this pretty busy months on the financing side the capital raising coupled with the very strong market. You mentioned GSL is still in very strong shape financially probably it is the strongest it's ever been clearly this has shown with the dividend increase so I guess, how do you use that balance shrink from here or is it further acquisitions is it.
I'm kind of Delevering paying down expensive debt and then or is there a baseline cash balance or leverage ratio that you're targeting.
Well Randy Thanks.
I may say Sami home debt.
We we like all wish to crawl before we walk them to walk before we run.
We are very risk averse.
As a management team.
And we stress test continuously.
With models that take the worst of the worst cases to be to be sleeping at night.
So yes, the intention is to grow it.
And we are working on various opportunities to grow the company, but at the same time day leverage we do not intend to increase our leverage we intend to reduce or limit its going forward more and more.
And at the same time grow and build a very strong company with a strong company is a company that can be.
Power fully known market conditions should not just in a great market and then when the market changes.
Do you feel that change we have.
Our balance sheet very strong, we're deleveraging and we're growing very selectively and carefully.
And with what we said to the investors on our various road shows that you've been part of and met most E.
We want to do deals that are immediately accretive to our balance sheet and that we've proven out by increasing the dividend to debt more than doubling the dividend, which shows that the deals. We're doing are bringing the money from a straight to the investors.
Got it makes sense and then lastly, real quick on slide six you have the the charters that are coming available I think you said seven ships coming due by the end of the year.
How do you kind of maximize.
Return there in terms of rate versus duration is there a relative the larger discount for two year or three year charter them or are you looking to kind of maximize the one year value on those or on the other on the other side of the equation do you sell those older ships. Once the current charter expires what are your thoughts on those options.
Generally speaking you make always assets.
As a rule of thumb, you always make a lot more money.
In containers by retaining the assets rather than selling the assets you make more money with the cash flows you can lock and then selling the assets.
Okay now.
The intention is to grow this to charter the ships as long as possible.
As high rate as possible now in today's market.
The norm for the sizes up to lets call it.
I don't know two and a half thousand 2500 is a I would say two to three years.
Maybe even longer but two to three years is the normal things. So theres no discount for two to three years. This is the market okay.
Okay.
If you if you would be looking and extend a further three years and you might have a 10, 20% discount.
But.
Having having assets that are you know me.
<unk> or older.
These smaller categories that we have opened now.
We we feel that we want to get the maximum out of these ships by chartering them out as long as we can at today's rates. So that's the strategy on this smaller segments, let's call. It middle Middle size segments is definitely long. Yeah. This is three to five years easy and then the large ships.
It's at least five years up to the norm. So we we intend to at least fix those shapes for smaller ships at me at the minimal free yes, midsize ships at a minimum of three years and largest ships at a minimum of three to five years.
So we tend to keep on doing what we've been doing successfully looking more and more cash flows.
For building up liquidity in the company, making a common stronger reducing debt.
And growing.
Well of course is that.
I'll give you them dividends to our shareholders like we have them.
Sure.
Got it will make sense whatever you're doing is working so keep it up thanks.
Thank you.
Yeah.
Our next question comes from Fotis, <unk> with Clarksons <unk> Securities.
Yes. Thank you.
George you mentioned a slower speed.
To meet the I M O carbon regulations coming due in 'twenty two 'twenty three.
So I'm curious if you could try to quantify that.
And maybe if you look at your own fleet.
What portion of that fleet needs to slow down the stream to be compliant.
Well, we still have a lot.
For the whole largely of course that would be better.
Yes. Thank you I will just say something that is interesting before 'twenty 'twenty night up to 2019 inclusive.
The speed of the ships going from let's say that the far east to west whether it's Europe or.
States are.
It was about 2018 notes in the way backward was 16 notes that at the envoy gets show. The average was 17 shows ships were trading with an average of 17.
Today. This has gone 21 notch towards from Friday still was the worst.
And returning up 20 or 19, so call. It call. It 20 notes average. So this is three notch higher average.
Than used to be.
So that's an important point to remember and that has happened because there's not enough ships.
Ships out there and the line of competencies in order to compensate they are increasing the speed of the ships.
Now.
I'm not January 'twenty, two 'twenty three.
I would say more than 80 per cent Duncan can can notice this in more detail the numbers.
<unk>.
More than 80 per cent of the fleet will have slowed down.
From today's speeds of 20 knots.
I would say probably 19.
Two to 18 show a couple of notch lower speeds.
That is also applying for GSL, 8% roughly I mean, we have a 50.
50 ships out of which nine are they.
The new technology those ships do not have to slow down.
To meet the excite the rest of the fleet has to slow down and that's the proportion of the world fleet of modern ships New design ships to two classic I would say probably 85% classic 15 percentage is the new design show 85 per cent of the fleet, we have slowed down.
By a couple of notch, which means roughly a reduction of the fleet capacity as of today of five a share.
6% to 10% reduction.
So shrinking the fleet by six to 10 per cent.
In total if you want to yeah sure sure just just just to add to.
To that further.
As George says.
The eco ships are the latest generation of container ships.
Is less likely materially less likely to be affected by E. X. I, then non eco ships and I think it's worth emphasizing but if you look at the mid size and smaller ships.
So the segments that we're participating in and you look at the peer group.
The global peer group of shifts within those segments up to say seven and a half thousand Teu.
Parents of leap Q, So I would say certainly under 20% of the ships and those midsize and smaller.
Segments on eco so that means that the midsize and smaller segments unlikely to be disproportionately affected by the implementation of E X sight in other words midsize and smaller ships are more likely to have to slow down and more likely to have to slow down further.
Then them be the largest segments, which is of course, great news in terms of the sort of supply tension within those midsize and smaller segments.
Yes, that's that's all great numbers you gave there.
Yeah.
And if you compare that to the expected fleet growth.
We should be looking at negative fleet growth right.
Sure.
That's my line.
Yes, that's how we see.
Which is great right, though and you mentioned fantastic market.
I'm sure you would get that question a lot, but what do you say to people who ask for.
What are going to target the market down again.
Yeah.
So what should investors look at in order to price it.
The head of debt curve so to speak.
Or what.
Sorry go go from Georgia.
Please yeah.
Well I was going to just give a very hedging also I find it very difficult.
When looking at the supply side of the equation, so the midsize and smaller vessels to envisage a set of circumstances.
But what really derail the market for us and I know I'm sort of frantically touching wood.
I'm pregnant jinx things by saying that but I think from a pure supply side picture perspective, particularly if you link it up to the decarbonization and E X I.
Dynamics that we've talked about earlier.
Find it quite difficult to envisage a demand side shock.
Strong enough to derail us I mean, we've just seen in 2020 the impact of a global pandemic a once in a century, we hope.
Event, and we've seen container shipping come through it.
And in very very positive terms, so I think that some.
That's a helpful reference point, but George maybe you have something to July at all you have a different view.
Well I mean containers container.
Shipping is linked to the global economy.
The only thing that I would I would be worried this if the global economy would dive.
You know mark materially from where it is today is something that I don't think that the consensus is expecting.
Otherwise and.
And I say materially meaning very materially.
That I don't think is in anybody's mind now what has what is interesting is that in containers every single year.
For the last 40 years, the previous year to the next year. The cargos are growing so that we'd never had.
And negative growth apart from two occasions, one occasion was in the meltdown of the Lehman in 2009.
And the pandemic of COVID-19. So these shots unique situations and these are the only two times in the history of our container shipping debt, we had another growth year.
Year on year of cargo. So the question is why the container shipping has been cyclical and the only reason knees supply people were over ordering.
So as long as this is kept in check.
I would say what Tom says you know I I'm sleeping vague.
The peacefully at night, and I'm, not worried and keeping fingers of course gross net to jinx it.
But if anything were to jinx it would only jinx it 'twenty five onwards, because they had no slots available to build ships earlier.
I mean that the social 24, finishing rapidly.
Because there's a lot of other types of ships being built not just containers, how as you can imagine diabetic adults from the up people are building their.
There's a lot more people debt built there's a lot.
And vitamins or their fragmented industry like ours.
Tankers, as well and so on and so forth.
Yeah.
That's great.
Just a final question from me.
Uh huh.
When.
When you're talking about growth opportunities to you.
We'd also look at buying your own stock.
That is also really.
Zone.
And in what.
Yes.
Cookie card volume and it's a return of capital effectively.
You can start paying dividends.
But you know one one of the reasons, where you think.
Mark has been held back in recent times.
The small free float.
Hum.
Yeah.
We hope to increase the free float with primary and secondary offerings.
We've also worked very hard as you know to increase sell side coverage.
Successfully.
Implementing announcing and then paying the dividend is the third plank and supporting the stock price is what I was just running the business effectively and I'm I'm sorry regarding the fleet, we keep all of our options under review.
Nothing is rolled out and nothing is broken.
England.
We we we look to deploy capital by way of dividends by way of accretive growth and bye bye all from.
Definitely amortization.
Okay. Thank you very much.
Yeah.
And then line here, if you'd like to ask a question at this time.
And warm.
Our next question comes from Liam Burke with B Riley.
Thank you George you mentioned growth opportunities on the acquisition front.
Are you seeing more competitive comp.
Competition on the pricing front the availability of vessels is tight and how is that continuing to effect.
Where do you see opportunities to add assets.
Yes, the obviously prices have gone up and they continuously go up but fortunately.
We are always placed to do deals that are off market and special deals. They have an angle different angle then you know in a normal.
Standard market deal.
And that we do have a pipeline of such transactions.
And then we pull a rabbit out of the Hot every now and then as you have seen.
And that's what we intend to do.
We do not intend to get into dogfights with with buying while the single ship here than simply sit there at high prices, we don't do that we'd do more strategic transactions.
Great and.
You mentioned regulation.
As the slow speeding as an alternative do you see.
Increased regulation.
Accelerating scrap rates and further benefiting the capacity side of the equation.
That's a tough question.
Tom fire away.
Sure.
Yes.
I would love to say, yes.
To the scrapping question, but I think in an environment, where capacity is already extremely tight the fleet is already fully employed.
And where the sort of supply side growth from a structural perspective is very limited I think it's highly unlikely that we see much in the way of scrapping of tool Liam in the near term.
Maybe in the out years by which I mean, you know 2024 25 and beyond.
The older ships that are being kicked out of the scrap yards now because they're owning so much money, we'll will start to be recycled out, but I think near term it's unlikely.
Great I was just making too much money.
Great. Thank you very much George.
Thanks, Dan.
That concludes today's question and answer session I'd like to turn the call back to Ian Webber for closing remarks.
Thanks for joining us and listening to our remarks and asking your questions. We look forward to giving you further updates from them.
GSL and the markets on our second quarter earnings call, which will be early August. Thank you.
Thank you.
Thank you.
Thanks, everyone.
Uh huh.
This concludes today's conference call. Thank you for participating you may now disconnect.
Yeah.
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