Ups and downs at Zim as market forces blow hot and cold

Photo: © Magiorestock

Stocks in New York-listed Zim have been on the rise for the past couple of days, with financial experts reporting “a wave of bargain buying”.

Zim Integrated Shipping Services listed on the New York Stock Exchange in January 2021, as freight rates were still rising. By March 2022, the stock had peaked at $88.62.

But what goes up, as they say, must come down and by 5 April this year, shares in the carrier were trading at, perhaps, a more realistic level of $17.62.

Financial experts at The Motley Fool reported short-sellers had targeted the stock over the past year, which had seen its share price plunge. And, following another dip in price last week, the financial consultant said “this bearish outlook may be wildly overdone”, given that its shares were valued at an “eye-catching” 0.45 times its trailing 12-month earnings.

“While it is true that Zim is likely to experience a hefty drop-off from both a top- and bottom-line standpoint this year, the stock is arguably being valued as if the company is in deep financial trouble. Nothing could be further from the truth,” argued The Motley Fool. And, citing company projections of an ebitda of between $1.8bn and $2.2bn for 2023, it said it was a “healthy and robust” business.

However, one analyst told The Loadstar that this year they expected small lines to leave the market – and among these small lines, the analyst included Zim, which the source expected “to lose an absolute fortune this year”.

The carrier has 139 ships in its fleet, but only eight are owned, according to the Statista website, the remainder are chartered, many at very high rates agreed in the pandemic boom years.

And Zim has a further 46 ships on the  way, many ordered by NOO Seaspan Corp for charters. Of the new ships, 28 will be fitted with LNG/diesel dual-fuelled engines: 10 of 15,000 teu and 18 of 7,700 teu; with deliveries expected to start next year.

Last month, when Zim released its 2022 full-year results, president and CEO Eli Glickman told The Loadstar: “We expect shippers such as Ikea, Home Depot and Target will see Zim as the first-choice carrier, and will pay a premium to use services with LNG ships.”

If Mr Glickman’s plan is to market his ships as environmentally friendly, reducing shippers’ carbon footprint, he may be disappointed, according to a report in The Loadstar yesterday.

One forwarder told The Loadstar recently: “If an importer sees importing costs increase substantially as a result of this [green energy], they will certainly become interested in lower-emission cargo movement.”

Until then, it will be a tough sell. The Motley Fool may yet be proved right, but market expectations for growth this year may also be overblown. And with a massive orderbook, the world’s container fleet is set to expand at a faster rate than even the best growth projections.

In which case I’d back the analyst over a Fool.