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  • Guy Drori

ZIM Integrated Shipping Services Ltd. (ZIM)

After two years of increases shipping tariff and container volumes, they are finally on decline trend. ZIM Integrated Shipping Services Ltd. (NYSE: ZIM) shares have tumbled to 52 weeks low.

Does the beaten-up share price already reflects all the bad news or there is still room for a downside?

Founded in Israel in 1945, ZIM is a leading global container liner shipping company with established operations in approximately 100 countries serving approximately 30,000 customers in over 350 ports worldwide.

In 2021 and H1 2022, ZIM had reported all time record results that were driven mainly from unprecedent shipping tariff and container volumes. Total revenues of $10.7B and $7.1B accordingly.

Average rates per TEU (twenty-foot equivalent unit - unit of cargo capacity) increases from ~$1,000 pre COVID-19 in early 2020 to more than $3,500 as of second quarter of 2022.

As a result 2022 is expected to be record year for ZIM with adjusted EBIT above $6B based on company guidance.

Containers rates are now in declined trend - ZIM reported that average TEU rate in Q2 2022 declined by 6.5% compare to Q1 2022 (still above 50% compare to Q2 2021) and with worries on a coming recession, rates and volumes probably will continue to decline.

With that said, ZIM share price still looks attractive - with recent market cap of below $3B. Way below equity book value of $5.2B as of end of Jun 2022, and with a very low net debt of $630M only.

Additional point to consider is the recently published company dividend policy - the company will distribute 30% to 50% of annual net income - with 2022 expected net income the dividend could reach above $2B for the full year (paid quarterly with a true-up at the end of the year).

The global economy face high uncertainty, which also reflected in the markets, but as to a long term observation, ZIM shares looks undervalued.

Disclosure: The article should not be considered a recommendation or a substitute for the reader's independent judgment, or an offer or investment marketing or investment advice.


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