➡️ This is a step-by-step stock review to determine if ZIM Integrated Shipping Services (ZIM) stock is a good buy. In this article, we’ll help you understand the company, where the company is going, the competition, and the leadership. This way you can make a more confident investment decision.
ZIM is one of the top 20 global shipping carriers in the world. They were founded in 1945 and are headquartered in Haifa, Israel.
Table of Contents
- Step 1: Tykr Rating
- Step 2: ZIM Company History
- Step 3: ZIM Business Model
- Step 4: ZIM News
- Step 5: ZIM Competition
- Step6: ZIM 4Ms
- Step 7: Is ZIM Stock a Good Buy?
Step 1: Tykr Rating
➡️ Goal: When you look at a stock, the first step is to look at the financials. Fortunately, Tykr does this for us automatically. The higher the score, the stronger the financials and the safer the investment. The higher the MOS, the higher the potential returns you can make.
- Summary: On Sale
- Score: 89/100
- MOS: 90%
- Share Price: $23
- Sticker Price: $117
Step 2: ZIM Company History
➡️ Goal: It’s important to know the company’s history. This helps us understand the various revenue streams, if they acquired other companies, how they grew through difficult times, and how they separated themselves from the competition.
- ZIM is a biblical word for “a fleet of ships”.
- In 1945, ZIM Palestine Navigation Company was founded by the Jewish Agency, the Israel Maritime League, and the Histadrut (General Federation of Laborers in the Land of Israel). The first shop was purchased in partnership with Harris and Dixon, a company based in London. The vessel was refurbished, renamed SS Kedma, and sailed to the future state of Israel.
- In 1948, the company was renamed ZIM Israel Navigation Company after the State of Israel was established that same year.
- During the 1947 – 1949 Palestine war, ZIM was the sole maritime connection with the State of Israel, supplying food, freight, and military equipment.
- In 1953, some of the money from the reparations agreement between Israel and West Germany was allocated to the purchase and construction of new shops. The SS Bergensfjord renamed Jerusalem, sailed the Israel-New York route.
- In 1955, ZIM took delivery of a 9,800-ton passenger-cargo ship called the SS Israel.
- In 1957, ZIM took delivery of two 10,000-ton ships called the SS Jerusalem and SS Theodor Herzi.
- In the 1950s and 1960s, ZIM concentrated on passenger ships with a small focus on cargo ships. Passenger ships were a popular means of traveling between countries and continents became popular in 1959.
- Between 1966 and 1969, passenger ships were phased out and ZIM primarily focused on cargo shipping. In 1966, the Jerusalem was chartered out to British-based P&O cruises and sold entirely in 1968.
- In the 1970s, ZIM expanded to the container shipping industry, which eventually became its main line of business.
- In 1981, one of its ships, Mezada, was lost at sea.
- In the 1990s, they built 15 container transportation ships.
- In 2008, ZIM attempted to go public on the Hong Kong Stock Exchange, but due to the global economic crisis, the IPO was called off.
- In 2009, ZIM required a cash injection of $450M by the Ofer family and a debt restructuring following the world’s container shipping downturn.
- In 2010, ZIM attempted to go public a second time but due to the slow growth of the economy, they decided to postpone.
- In 2021, ZIM went public on the New York Stock Exchange. That same year, it reported the biggest profit in its 75-year history.
- As of 2022, ZIM has the following:
- 547,000 TEUs (Twenty-foot equivalent units) or, in other words, containers.
- 113 ships
- 180 ports
- 4,200 employees
- 170 offices in 100 countries
Step 3: ZIM Business Model
How does ZIM make money?
➡️ Goal: It’s important to know how a company makes money. A mature business model has multiple streams of revenue which allow the company to weather downturns in the economy.
ZIM makes money with the following services.
- Shipping – ZIM charges $3,848 per TEU. The largest ZIM ship, called the Cape Sounio, which is 330 meters long and 48 meters wide, can transport 11,000 TEUs. That means that a single ship is generating $42M to move goods in one direction.
- Demurrage – It is a charge when the full container is not moved out of the port/terminal for unpacking within the allowed free days offered by the shipping line. The charge is levied by the shipping line to the importer.
- Detention – Also known as a per diem fee, is raised when the importer has picked up the container for unpacking, but the empty container has not returned to the nominated depot within the agreed free time. It is normal for a port to offer 3-5 days of free storage. However, each terminal has slightly different rules, which can change at any time.
Step 4: ZIM News
➡️ Goal: It’s important to highlight important company-specific news as well as industry-specific news over the last month and year. We don’t need daily news on a company to make buy or sell decisions because we’re investors, not traders. Overall, we want sufficient news to understand where a company and industry are heading over the next year or few years.
An article from jpost.com talks about ZIM went from billions in debt to one of Israel’s most profitable companies. In 2020, the net profit was $25M and in 2021, the net profit jumped up to $888M. They also doubled their fleet from 54 ships to 113 ships in one year. This article also talks about ZIM being able to ship goods from China to the US in 11 – 12 days, whereas airlines transport goods in 6 days. Although ZIM is headquartered in Israel, only 9% of its business is in Israel. The majority is between the US and China.
An article from investorplace.com lists 7 shipping stocks to consider buying, which include AP Moeller Maersk, ZIM Integrated Shipping, Global Ship Lease, Genco Shipping & Trading, Star Bulk Carriers, GasLog Partners, and Teekay Corp. ZIM is on the list because the company has increased profitability, but it’s important to note that shipping rates may fall in the future which will cause lower revenues.
An article from cnbc.com states that shipping rates and shipping volumes are declining. This means shipping companies will likely report lower revenues in the oncoming earnings reports.
An article from cnbc.com states that US shippers are seeing a 20% drop in ocean freight orders. Some of the inventory with the steepest decline include machinery, household products, industrial products, and apparel. This article also states that ocean carriers are canceling as much as 50% of sailings due to vessel rebalancing.
An article from statista.com highlights how shipping rates have greatly increased in 2021 but are starting to decline again. This is the reason why most shipping companies have seen incredible improvements with revenues and profits but likely won’t last due to the recession.
For the latest news on this stock, please login to Tykr.
Step 5: ZIM Competiton
➡️ Goal: It’s important to understand who the competitors are and how their financials rank against this company. Try to find 5 other competitors to rank against based on Score. The best way to find competitors is to Google “XYZ competition” and replace XYZ with the company name. You can also go to Tykr and click on the “Similar Stocks” tab on each stock to see similar companies in the same industry.
ZIM Integrated Shipping Services (ZIM)
- Summary: On Sale
- Score: 89/100
- MOS: 90%
- Share Price: $23
- Sticker Price: $117
- Number of ships: 113
- TEUs: 547,000
A.P. Møller Maersk (MAERSK-A)
- Summary: On Sale
- Score: 78/100
- MOS: 61%
- Share Price: kr15,240 ($1,384)
- Sticker Price: kr30,956 ($2,813)
- Number of ships: 583
- TEUs: 3,014,500
Global Ship Lease (GSL)
- Summary: On Sale
- Score: 67/100
- MOS: 90%
- Share Price: $17
- Sticker Price: $86
- Number of ships: 65
- TEUs: 342,000
Genco Shipping & Trading Limited (GNK)
- Summary: On Sale
- Score: 72/100
- MOS: 85%
- Share Price: $13
- Sticker Price: $50
- Number of ships: 44
- TEUs: Unknown
Star Bulk Carriers (SBLK)
- Summary: On Sale
- Score: 67/100
- MOS: 90%
- Share Price: $17
- Sticker Price: $89
- Number of ships: 128
- TEUs: Unknown
Step 6: ZIM 4Ms
➡️ Goal: All of our homework on this company leads up to the 4M checklist. A lot of investors only look at the numbers. Yes, it’s important to look at the first M (MOS) which is the math part of investing but it’s also important to look past the numbers and also look at the business, the competition, and the management. If all 4Ms pass, we should have high confidence in buying this stock.
✅ MOS: The score of 89/100 shows that the financials are very strong. The MOS 0f 90% also shows some strong upside potential.
✅ Meaning: Shipping goods around the world will always be in high demand. The factor to pay attention to is the recession. Shipping rates and volumes are declining, which means ZIM and its competition will likely see a decline in revenues. If you look at the quarterly revenue within Tykr, you’ll see the decline is starting to occur. If we hit a recession, keep in mind there is always a recovery after a recession. They are always short-term.
✅ Moat: There are some strong competitors in this space, including Maersk and Global Ship Lease. However, there is plenty of business to go around.
✅ Management: Eli Glickman has served as CEO and President of ZIM since 2017. Prior to ZIM, he served as CEO of Israel Electric company for 5 years. Prior to Israel Electric Company, he served as Deputy CEO of Partner – Orange Cellular Communication. Prior to Orange Cellular, he served as CEO of Exel MPL. The Glassdoor rating of ZIM is 4.5/5.0 and the CEO approval is 98%. Overall, Glickman has both excellent experience running other companies and his ratings are very high.
If you’re interested, you may complete your own 4M checklist on this stock or other stocks by logging into Tykr.
Step 7: Is ZIM stock a good buy?
The financials of most shipping companies look great right now but due to the bear market/recession, shipping rates and volumes are declining. This will likely cause revenues to decline which may cause the share price to decline and hold. The stock is currently down over 70% from its all-time high but probably won’t correct as fast as tech stocks when the market corrects. On the other hand, shipping is a global necessity and won’t go away. If you’re looking for a stock that may see slow and steady growth over the next 10 years, this may be a stock for your portfolio.
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The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.
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