Halls of Shrewd'm / US Policy❤
No. of Recommendations: 1
Can someone be the devils advocate on (ZIM) ZIM Integrated Shipping Services? I only see upside on this stock and believe it's highly undervalued but want to hear some different opinions. It's trading at a P/E of 0.36 compared to its competitors most trading between 2-7 p/e. Zim is sitting on $3.6B in cash with $3.3B in debt. Market cap is $2B and tangible book value is $4.5B. They pay a dividend of 30% of profits which at recent prices has given it a very high yield. With it being a shipping service, I can see how future earnings will likely be lower given the current position we're in with the economy, but even with a 50% drop in earnings, the current price would still be cheap. Why shouldn't I be backing up the pickup and and loading up on this stock?
No. of Recommendations: 2
Why shouldn't I be backing up the pickup and and loading up on this stock?
The common consensus among analysts who follow ZIM is that earnings next year will be around $3 a share. This is a drop of over 90%. The year after that the company is generally expected to show a loss of about ?$3.50 a share.
Like Wayne Gretzky says, go where the puck is going, not where it is. ?Warren Buffett
No. of Recommendations: 2
Hi,
So you want some negatives on ZIM?
1. What do you know about container shipping?
or
What's the difference between say, container shipping company Danaos Corporation (DAC) and ZIM?
2. ZIM is involved in spot trading
a. what % of its fleet?
b. is this good or bad?
3. How has the container shipping market been trending more recently vs the first half of 2022?
Even knowing the answers to the above, have a bloodied ZIM stake (and still bought more ZIM on 12/30/22 to close out the year :) )
No. of Recommendations: 1
1. What do you know about container shipping?
or
What's the difference between say, container shipping company Danaos Corporation (DAC) and ZIM?
2. ZIM is involved in spot trading
a. what % of its fleet?
b. is this good or bad?
3. How has the container shipping market been trending more recently vs the first half of 2022?
Even knowing the answers to the above, have a bloodied ZIM stake
Answer to #1, very. little. But looking quickly, recent high prices have sent ZIM from losing money to making a ton of money, i.e more net income in the last 2 quarters ($2.5b) than their entire market cap ($2.1b). Obviously, their fortunes are closely tied to current shipping rates, which have been very high in the last year or so but are now plunging back close to levels of a few years ago. Danaos (DAC), on the other hand, has long term deals in place, with average charter duration of 3.5 years at the end of last quarter. Interestingly, DAC was a substantial shareholder of ZIM, and sold everything last quarter.
Answer to #2, I don't know, must be pretty high. Can you suggest where this kind of info can be found, comparing different operators? I haven't been able to find it in ZIM's reports. Obviously, high reliance on spot trading is great when prices are good, and it's terrible when prices are bad.
Answer to #3: rates are trending heavily down, and will obviously not be helped if the world falls into a recession.
All this said, if ZIM can generate even a few more quarters close to the last few, and if they keep paying out half of their net income in dividends, at a market cap of $2b, it wouldn't take long for a bet on ZIM to work out nicely. Seems like a nice call option on the possibility of the world not going to hell fast.
drb
No. of Recommendations: 4
All this said, if ZIM can generate even a few more quarters close to the last few, and if they keep paying out half of their net income in dividends, at a market cap of $2b, it wouldn't take long for a bet on ZIM to work out nicely.
Chances are ZIM in not going to generate a few more quarters close to the last few, at least according the consensus of analysts that follow the company. Here's some data:
Quarterly analysts' earnings estimate:
Dec 2022
3.59
Quarterly reported earnings:
Sep 2022
9.66
Jun 2022
11.07
Mar 2022
14.19
Dec 2021
14.17
Annual analysts' earnings estimates:
Dec 2022
38.19
Dec 2023
2.91
Dec 2024
-3.34
ZIM really is a falling knife as far as future earnings are concerned. If however, someone believes that analysts' estimates are wrong and they have a good reason to think so, then backing up the truck will make sense to them. Otherwise, however cheap a company's shares may seem based on one year's earnings that is not a signal, in my opinion, to buy in the face of the expectation of negative earnings two years out.
No. of Recommendations: 6
@DTB
My mistake for not pointing it out. But, the questions were primarily for the the thread OP.
--
The OP answering the questions would have helped find the negative he is seeking.
But since the questions ended up being open-ended, I guess I should provide some answers.
#1. Unlike other sectors in shipping, the container shipping sector is more than just getting the product i.e. containers, from port A (source) to port B (destination). There are sometimes added elements on either end e.g. delivery of empty containers to a factory or warehouse for loading. Or getting the container from port B to the actual final destination. For ZIM, it is actually in its name - ZIM Integrated Shipping.
DAC is just an owner of a fleet of container vessels, and its main objective is to make sure its vessels are working/chartered.
I like to picture the container shipping sector as having a tiered structure.
Tier 1: Liner companies - Maersk, CMA CGM, MSC, ONE, ZIM (on the smaller end of liner companies)
Tier 2: Containership leasing entities - Own container vessels, but don't have the resources to scale up the first tier. The companies just focus on chartering their vessels to one or more Tier 1 companies
Tier 3: Small containership owners - own container vessels, and rent out their vessels on a per voyage basis, or indexed basis.
ZIM as a liner company takes on the responsibility of managing vessels, fueling vessels, (indirectly) operating the vessel (usually the vessel crew is paid by the owner via the charterer). See how the risks are adding up for ZIM now?
#2. Big liner companies usually have standard routes they sail on a periodic basis. Four or five ports in Asia to load cargo, then book it to Europe (or North America) and deliver cargo at one or two locations. This is in contrast to spot voyages (more unpredictable in nature). ZIM mgmt were a lot more guarded on the % of spot business they had. My understanding is that ZIM's spot cargo is higher than most liner companies.
#3. Container was on a upswing most of 2021. The following year, 2022, market continued to be tight and the spot rates continued higher ... until July/Aug 2022. Then spot rates collapsed. Is this a problem for ZIM? That's why I asked the second question? The reality is the market has pummeled the share price of other publicly traded liner companies (Maersk, Hapag Lloyd) also. Just not as hard as ZIM's price.
Is ZIM's cash position a good one? Yes. But ZIM has above-average charter obligations as a majority of their vessels are leased (not owned). With weakening container demand, container vessel asset values will likely start declining. The ZIM asset-light model might be an advantage in that situation.
Is this better for understanding at least some of ZIM's price plunge?
No. of Recommendations: 1
Reading these posts and looking at yahoo finance, analyst estimates, I will not be purchasing it.
No. of Recommendations: 3
Annual analysts' earnings estimates:
Dec 2022
38.19
Dec 2023
2.91
Dec 2024
-3.34
ZIM really is a falling knife as far as future earnings are concerned. If however, someone believes that analysts' estimates are wrong and they have a good reason to think so, then backing up the truck will make sense to them.
Ok, that all makes sense, but how on earth can analysts justify an estimate of negative earnings 12-24 months from now? I guess they are pricing in a recession, and Zim has not typically been profitable in the last 10 years, so a return to a baseline of non-profitability does make some sense. This one probably belongs in my 'too hard' pile.
dtb
