Gaslog Ltd: Fleet Buildout Expands Profitability

Ashland Heights Investments |

Gaslog Ltd (NYSE: GLOG) is one of the premier publicly-traded LNG shipping firms in the world.  Its current fleet of large, modern vessels stands at 13, with an additional 7 vessels under construction.  All of the under-construction vessels have been chartered out in long-term deals.  A majority of the existing fleet is chartered under contracts lasting at least 5 years and the few vessels not chartered are fitted with modern propulsion systems (TFDE), which command a premium price on the spot market and appeal to new charterers who are seeking high fuel efficiency with low boil-off rate (BOR).

GLOG derives significant value from its MLP daughter Gaslog Partners (NYSE: GLOP).  In recent years, GLOG has managed to “drop-down” vessels with long-term charters to GLOP in exchange for cash and stock.  The deal valuations have been such that GLOG is compensated above market value and is therefore able to bring future cashflows forward as a means of reinvesting in its fleet and paying shareholder dividends.  GLOG has funded its newbuild program by leveraging its balance sheet and securing term debt at attractive interest rates.

GLOG maintains close business ties to two of the premier companies in the LNG sector—Shell and Cheniere.  Having high quality counterparties is vital to mitigating default risk and providing access to future projects.

GLOG pays a regular quarterly dividend of $0.15/share and for two consecutive years has rewarded shareholders with a year-end special dividend of at least $0.38/share.  The total 2019 dividend now yields more than 14% and shows signs of growth heading into 2020 and 2021 as the newbuild fleet enters into service.

The recent share price has fallen to the mid-single digits and we believe this an attractive entry point for value-oriented investors who have an eye toward the future.  In the meantime, shareholders are rewarded with a yield of 14% which we anticipate will remain sustainable.