Stock Analysis & Ideas

Recently Listed ZIM Integrated Stays Afloat on Troubled Waters

Story Highlights

ZIM, which got listed on the NYSE last year, has made significant strides in a short duration. The company also looks strongly positioned to leverage improving trade activities amid cost, geopolitical, and regulatory headwinds.

Israeli company, ZIM Integrated Shipping Services Ltd. (NYSE: ZIM) provides container liner shipping services both domestically and internationally. Its port-to-port and door-to-door offerings are used across multiple trade zones, including Atlantic, Intra-Asia, and Transpacific.

Since its inception in 1945, the company has grown impressively. It served 36,000 customers and operated 118 vessels as of 2021-end. The company started trading on the NYSE in January last year.

The IPO, which closed on February 1, 2021, helped the company raise $217.5 million in gross proceeds. The shares offered were 14.5 million, while the price was fixed at $15 per share. The IPO volume and price were below the company’s initial offerings of 17.5 million shares and price band of $16-$19 per share.

Leveraging years of experience and the capital raised from the stock market has been beneficial for ZIM Integrated since its debut on the NYSE.

A brief discussion on ZIM Integrated is provided below:

Growth in Share Price & Market Capitalization

ZIM Integrated opened the trading session at $11.50 per share on January 28, 2021, lower than its IPO price of $15. Despite a weak opening, the company’s share price has strengthened over the quarters.

On January 28, 2021, the company ended the trading session at $8.43, and it has grown 733.9% since then to $70.30 (as of May 25, 2022). Presently, the company’s market capitalization is $8.4 billion.

Significant Decisions

In February 2021, ZIM Integrated signed an agreement to charter 10 15,000 TEU liquefied natural gas (LNG) dual-fuel container vessels. The company’s President and CEO, Eli Glickman, opined that the strategic long-term deal will help ZIM Integrated “meet growing market demand on the Asia – US East Coast trade” and “address environmental issues.”

In April 2021, ZIM Integrated formed ZIMARK in collaboration with Sodyo Ltd., an Israeli company. ZIMARK will provide high-quality scanning services to the supply chain and logistics industries. Also, in June, the company’s commercial agreement with a business unit of Alibaba Group Holding Ltd. (NYSE: BABA) was extended for a couple of years. Further, in October, the company acquired seven vessels (second hand).

In January this year, ZIM Integrated and its 2M alliance partners agreed to expand their association in the Asia-USGC and Asia-USEC trades. Also, the company has signed an agreement to charter 13 vessels in February. In March, the company unveiled a new e-commerce service, ZIM Ecommerce Baltimore Express.

In May, the company impressed the market with a better-than-expected result for the first quarter of 2022. Its earnings surpassed the consensus estimate by 10.8%, while revenues exceeded the same by 6.6%.

Solid Growth Drives & Projections

ZIM Integrated is well-positioned to leverage from growth in carried volumes, hike in average freight rates, and charter of dual-fuel container vessels. Also, healthy demand for such seaborne services in the wake of improving economic conditions is advantageous.

Glickman said, “We are excited to carry our exceptional momentum forward, continue executing our global-niche strategy and advancing ZIM’s position as an innovative digital leader of seaborne transportation to maximize long-term shareholder value.”

For 2022, the company anticipates adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) to be in the range of $7.8 billion to $8.2 billion and adjusted earnings before interest and taxes of $6.3 billion to $6.7 billion. This is an increase from the company’s previous projections of $7.1 billion to $7.5 billion for EBITDA and $5.6 billion to $6 billion for EBIT.

For the second quarter of 2022, the consensus earnings estimate for ZIM is at $12.6 per share, higher than the year-ago tally of $7.38 per share.

TipRanks’ Data

A few days ago, Christopher Robertson of Jefferies reiterated a Buy rating on ZIM with a price target of $100 per share (42.25% upside potential).

The company has a Hold consensus rating based on one Buy, one Hold, and one Sell. ZIM’s price forecast of $73.93 suggests 5.16% upside potential from current levels.

Risk factors

According to the TipRanks Risk Factors tool, ZIM’s main risk categories are Finance & Corporate and Legal & Regulatory, which contribute 16 and 14 risks, respectively, to the total 55 risks identified for the stock.

Conclusion

ZIM’s impressive performances and growth prospects are appealing. However, its exposure to multiple risks is worrying.

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