ZIM is a small container shipping company, around 10 in global ranks, that is producing tremendous results (as are peers) on very high TEU (twenty foot equivalent container unit) rates that in 4Q21 grew 145% vs 4Q20. This produced EBITDA of US$2.3bn +339% YoY and prompted the company to declare a US$17 dividend or over 20%.
More importantly it guided for a US$7bn EBITDA in YE22 on a higher average TEU rates and volume growth of 6%.
Even better is the valuation at under 2x PE. I built a model and have projected that the YE22 results could be better than YE21. The company has contracted much of the years volume at high rates, so even the spike in oil prices should not dent cash flow.
The stock is cheap because the market does not believe the high TEU rate scenario can last. I disagree and believe the industry has learned a valuable lesson from the pandemic, customer can pay more.
Container shipping companies have been the dumb pipes of the global trade business for 20yrs with 10% EBITDA margins that barely covered capex. Now they are generating 50% margins and while this is not likely sustainable, a 20% level is, which changes the long term valuation of the sector.
Below 3 rate scenarios and upside estimates. $ZIM , $HLAG.DE , $MAERSKB.CO , $GOGL.OL
