ZIM Integrated Shipping Services Ltd (NYSE: ZIM) is an Israeli international cargo shipping company and one of the top 20 global carriers. It has a $7.6bn market cap, and the ZIM share price has risen 380% in the past year.
What is ZIM?
ZIM Integrated Shipping Services was founded way back in 1945. Its services include shipping agencies, storage, distribution, forwarding and land transportation. It went public via IPO on the New York Stock Exchange in February 2021.
One of the reasons ZIM captured the attention of investors is its partnership with Chinese retail giant Alibaba (NASDAQ: BABA). ZIM provides Alibaba.com with logistics technology, improving the efficiency of its international shipments.
How does ZIM make money?
ZIM makes money by shipping goods all over the world. It charges per container and contract lengths vary but can be from a few months to two or three years. ZIM's profit comes after accounting for fuel costs, vessel and container lease or purchase price, port and logistic fees and staff salaries for its sales and logistics teams.
Shipping is a cyclical industry that cycles through periods of boom and bust. COVID has accelerated demand for shipping containers, thus raising the prices, and bringing a favorable economic position to ZIM.
For the first nine months of 2021, ZIM's average freight rate per twenty-foot container was $2,510, more than double the year-over-year period.
ZIM's primary approach to securing shipping container capacity is Relying on the charter market. This allows it to source the fleet it needs to capitalize on attractive opportunities.
Financial Overview and Metrics:
Earnings per share (EPS) soared in 2021. Q321 EPS came in at $12.16, far surpassing Q320, which was $1.44.
The fiscal year 2020 EPS was £5.22, projected to come in at £38.25 for FY21. This gives an expected P/E of 1.5.
ZIM offers a 15% dividend yield, making it an attractive investment for long-term compounding investors. In September, the company also issued a $2 per share special dividend and a $2.50 per share interim dividend in December 2021.
P/E (LTM): 2.3
P/BV: 2.4
P/S: 0.9
Dividend Yield: 15.3%
Last year ZIM significantly increased its cash position while reducing its net debt by $1.2bn compared to year-end 2020. Free cash flow in Q3 totaled $1.72bn compared to $237m in Q320.
Why is ZIM stock up?
The COVID pandemic disrupted international markets resulting in supply chain chaos. This has led shipping stocks to perform well over the past two years.
Other shipping stocks that have also fared well include:
Danaos (NYSE: DAC): 225%
Star Bulk Carriers (NASDAQ: SBLK): 112%
Textainer Group (NYSE: TGH): 101%
A.P. Møller-Mærsk A/S (CPH: MAERSK-B): 72%
Hapag-Lloyd (ETR: HLAG): 176%
COSCO Shipping Holdings (OTCMKTS: CICOY): 115%
Evergreen Marine (TPE: 2603): 261%
Orient Overseas International (OTCMKTS: OROVY): 170%
While these are all impressive, it's clear ZIM stock is the winner with a 380% share price rise over the last twelve months.
Is ZIM a good investment?
The industry tailwinds that propelled the ZIM share price in 2021 are still intact. Shipping industry rates are still higher than they were pre-pandemic, and supply chain disruption is ongoing.
Meanwhile, contract lengths have extended to 24-36 months, 2 to 3 times longer than pre-COVID durations.
The current dividend yield of 15.3% is highly attractive, and the high cash balance and no debt mean this stock looks like a good investment in 2022.