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GLTR - Globaltrans


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I'm interested in any thoughts, both positive and negative, on Globaltrans (LSE:GLTR).

 

Globaltrans is a railcar operator transporting metallurgical cargoes, oil products, coal, and construction materials predominantly in Russia. The business has ~7% share of freight rail shipments in Russia. In 2019 the company operated a fleet of approximately 70k units with 96% ownership, the core of which is gondola cars (65% of fleet) and tank cars (28% of fleet). The company serves several Russian companies in the metals and mining, oil and gas, and other industrial sectors. The business was founded in 2004 and is based in Moscow, Russia.

 

I've provided some high level points below. Happy to hear any perspectives on it. Thanks

 

  • Ruble currency exposure
  • Exposure to Russia macroeconomic climate
  • Indirect exposure to commodity prices (oil, metals, etc.)
  • Industry suffered overcapacity in 2014-2016, leading to significant declines in lease rates, which impacted profitability meaningfully
  • Risk of reduction in rail freight tariffs
  • Customer concentration - revenues from Metalloinvest, MMK, TMK, ChelPipe, and Rosneft contracts contribute about 60% of revenue
  • Margins are elevated today relative to last 15 years of publicly disclosed figures - LTM EBIT margin of 34% relative to 15 year average of ~21% and low in 2015 of 14%
  • Globaltrans does not own its own rail, in contrast with some large rail companies in North America
  • Not a part of any major stock index to my knowledge
  • Company is controlled by five founders who cumulatively own 43% of the company. 57% of the company is free float
  • Russian railways are the third longest by length and third by volume of freight hauled, after the railways of the United States and China
  • Excluding pipelines, Russian railways carry approximately 90% of Russian freight
  • GLTR's unlevered returns on capital have ranged between 10%-25% for most of the past 15 years, with weakness in 2013-2016 in part due to oversupply issues noted above
  • Including special dividend, 20% LTM dividend yield on current price. Formally stated dividend policy - Not less than 50% of FCF when leverage less than 1.0x, not less than 30% when leverage from 1.0х to 2.0х
  • Since 2006, cumulative dividends (including special dividends) have roughly equated to total current market capitalization
  • Business trades at 1.1x LTM revenue, ~3x LTM EBITDA, ~4x LTM Earnings, and 1.5x book value. In 2009, business valuation on book value bottomed out at 0.2x
  • Current net debt / LTM EBITDA is 0.7x
  • Average age of fleet (11.5 years) is younger than peer average, and compared with useful life for gondola cars of 22 years and for tank cars of 32 years
  • Globaltrans works with 500+ clients in Russia and CIS countries, and has long term business relationships with many of its largest customers

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I'm looking at it as well. Make sense in my view. Earnings are likely to be lower for a while (maybe even negative, who knows), it looks as a cyclical business stuck in all the wrong commodities for a while. However, who cares, it seems to be quite efficient operator through the cycle.

 

The only thing I would watch if there is a sudden change of the majority shareholder. Then the situation should be reassessed.

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Cheap steady business in a pretty problematic country. Don't think you are really exposed to the ruble or commodities - this is a business that works on a margin based on shipping volume and weight, not price of the thing being shipped. Also it's a cost of capital business where you can raise prices if the ruble falls.

 

There is no growth here. It seems there is looking in rubles, but translated to USD there is near zero growth since 2005. This is verified by looking at shipping volumes since 2005 - the company provides this data.

 

Company has a few very large clients. Management seems decent enough and provides a lot of useful info. Almost all costs are variable. 

 

It is a nice place to scoop your 20%+ yield until the next revolution comes. Probably after Putin is gone (10-15 years). GLTA

 

P.S. I'm a native Russian speaker.

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  • 5 months later...

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