Is ZIM Integrated Shipping Services (ZIM) stock a good buy?

Is ZIM Integrated Shipping Services (ZIM) stock a good buy?

➡️ Although we do outline some of the latest news as of the date of this post, this review on ZIM will help you determine if this stock is a good buy, sell, or hold. Our goal is to help you understand the company, where the company is going, the competition, and the leadership. Keep in mind, investing is more than just numbers. It’s wise to look past the numbers and look at the business. This review does exactly that.

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

Tykr Rating

  • Summary: On Sale
  • Score: 89/100
  • MOS: 90%
  • Share Price: $23
  • Sticker Price: $117

ZIM Company History

  • 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

ZIM Business Model

How does ZIM make money?

ZIM makes money with the following services.

  1. 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 one direction.
  2. 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.
  3. 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.

ZIM News

This article from jpost.com talks about ZIM going 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.

This 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.

This 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.

This 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.

This 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. 

ZIM Competiton

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

ZIM 4Ms

✅ 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.

ZIM Financials

Now let’s take a look at the financials. A wise investor should be able to read the income statement, cash flow statement, and balance sheet and within 60 seconds have a pretty good idea of how the business is performing.

Revenue (Found on the Income Statement)

  • 2018: $3.2B
  • 2019: $3.3B
  • 2020: $3.9B
  • 2021: $10.7B
  • Revenue was flat between 2018 and 2020 but significantly jumped in 2021 due to the increase in shipping rates.

Net Income (Found on the Income Statement)

  • 2018: -$125M
  • 2019: -$18M
  • 2020: $517M
  • 2021: $4.6B
  • Net Income has significantly increased in 2021.

EPS (Found on the Income Statement)

  • 2018: -1.26
  • 2019: -.18
  • 2020: 4.41
  • 2021: 39.49
  • EPS has significantly increased in 2021.

Free Cash Flow (Found on the Cash Flow Statement)

  • 2018: $202M
  • 2019: $0
  • 2020: $0
  • 2021: $4.9B
  • Free Cash Flow has significantly increased in 2021.

Total Assets (Found on the Balance Sheet)

  • 2018: $1.8B
  • 2019: $1.9B
  • 2020: $2.8B
  • 2021: $9.8B
  • Total Assets have also significantly increased in 2021.

Total Liabilities (Found on the Balance Sheet)

  • 2018: $2.05B
  • 2019: $2.18B
  • 2020: $2.55B
  • 2021: $5.24B
  • Total Liabilities have increased. This is most likely due to the addition of more ships and employees.

Total Debt (Found on the Balance Sheet)

  • 2018: $867M
  • 2019: $897M
  • 2020: $1.2B
  • 2021: $3.3B
  • Total Debt has increased which is okay. This is most likely due to bank loans for building new ships.

Total Equity (Found on the Balance Sheet)

  • 2018: -$224M
  • 2019: -$252M
  • 2020: $267M
  • 2021: $4.59B
  • Total Equity has significantly increased.

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.

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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