ZIM - A Classic Round Trip
There is no height limit for this roller coaster
Stock trading is typically easy. You buy low and sell high, simple. Sometimes people forget to sell, they forget how shipping is cyclical, they forget how objects in motion stay in motion, they forget, that which goes up must come down. The excitement takes over, the stock is at $80, but the new broker target is $100, this time is different, you know!
So here we are. ZIM IPO’d to a poor market backdrop as the IPO priced below the expected range of $16-19, typically a bad sign in the world of IPOs as the pricing window is closely managed. The stock then traded down sharply. Remember GameStop? ZIM was fighting the meme-stock vs. hedge fund macro battle, which disrupted the trading universe for a week or two.
It feels like a life-time ago, interest rates were 0, the market was humming, and some retail investors trading in their basements had the elite hedge fund managers on edge.
HAIFA, Israel, Feb. 1, 2021 /PRNewswire/ -- ZIM Integrated Shipping Services Ltd. (NYSE: ZIM) (the "Company"), a global container liner shipping company with over 75 years of experience, announced today the closing of its initial public offering ("IPO") of 14,500,000 ordinary shares, at a price to the public of $15.00 per ordinary share, for gross proceeds of $217.5 million.
Eventually the supply chain crisis narrative took over and the stock skyrocketed. North of $80/share. But nothing in shipping is permanent and now the stock is back to its humble trading levels in the teens (granted with dividends paid).
So where does it go from here? Shipping analyst J Mintzmeyer, an early ZIM cheer-leader who was wise enough to realize when you 6x+ in shipping you need to take profits, is now long.
Absolute Home Run. ZIM down 65%, DAC down 15% and GSL up 5%.
But when the tides turn, eventually one should change course. With the backdrop of the market crashing, J rallied the Value Investor network to the stock.
Drewry’s World Container Index (WCI) for the week ended 9 March was $1,806/feu, an 80% decrease YoY
The anonymous Twitter universe has taken notice as well. Bitcoin Bealzabub, in a cryptic and hip sounding Tweet, said:
Punting a long on $ZIM
At the lows with bull div on LTF... dropping + holding below $16.25 and I am wrong.
But not everyone shares such exuberance. Jefferies, the leading shipping investment bank, has a humble price target of $20/share. Down from their price target of $120 in March 2022, which was made at the same time now Jefferies analyst, Omar Nokta, downgraded ZIM and reduced his price target while at his last firm Clarksons.
So now ZIM does appear to be back in a ‘normalized’ environment, if there is such a thing in the container market. But with a 2023E EBITDA guidance of $1.8-$2.2Bn, that is a massive shock to their 2021-2022 figures.
ZIM did $7.5Bn in Adj. EBITDA in 2022, $6.6Bn in 2021, and $1.0Bn in 2020.
The container market is back to earth and ZIM has a lot of ships under management and on charter.
As of December 31, 2022, the remaining average duration of our chartered fleet was approximately 26 months, based on earliest period of redelivery
Mark your calendars. The industry is tuning in. Short interest is near 20%. This could get interesting.