Haifa, Israel-based ZIM Integrated Shipping Services (ZIM) is a global, asset-light container-liner shipping company. I am bullish on the stock.
Among Wall Street’s other worries (Omicron, inflation, the Federal Reserve, etc.), persistent supply-chain bottlenecks are a major concern. As a result, premier shipping businesses are in high demand now.
With that in mind, it’s a perfect time to consider adding ZIM Integrated Shipping Services to your watch list. ZIM has an eye-poppingly low trailing 12-month price-to-earnings ratio of 2.07, which indicates a potential bargain.
Not only that, but ZIM pays a forward annual dividend yield of 17.21%. Imagine that: the share price could fall 17% over the next year, and investors would still be at break-even, as long as the company doesn’t cut its dividend.
Let’s not get ahead of ourselves, though. As an informed investor, you should “know what you own,” as they say. So, let’s get to know ZIM Integrated Shipping Services a little bit better now.
A Shipping-Market Trailblazer
Admittedly, ZIM stock hasn’t been around very long. On Jan. 27, 2021, ZIM Integrated Shipping Services announced the pricing of its initial public offering (IPO) at $15. The next day, ZIM stock began trading at that same price.
Don’t get the wrong idea, though, as this company has been in the shipping business for a very long time. Launched in Israel way back in 1945, ZIM Integrated Shipping Services pioneered the modern container-shipping industry in the early 1970s.
The company operates a fleet of around 100 vessels. That’s not a large number of vessels, but ZIM’s asset-light model is what differentiates the company from its competition.
In the shipping business, sometimes lighter and smaller is better. ZIM’s asset-light model allows for a more flexible cost structure and operational efficiency. This can lead to enhanced profitability, while helping the company to address the world’s supply-chain issues more quickly and effectively.
Alleviating a Shortage
Are your home heating bills going through the roof lately? If your home uses natural gas, you might see your heating bills double or more in the near future.
The spot price of natural gas, including liquefied natural gas (LNG), skyrocketed in 2021. This is, in large part, due to a severe imbalance between supply and demand, as well as difficulty in getting LNG shipped to the regions that need it during this bitterly cold winter.
Along comes ZIM Integrated Shipping Services with a partnership that could help to ease this crisis – not immediately, but for the long term.
Reportedly, ZIM has a strategic agreement with Seaspan Corporation, a wholly owned subsidiary of Atlas Corp. (ATCO), for the long-term charter of ten 15,000 TEU LNG dual-fuel container vessels, with the purpose of serving ZIM’s Asia – U.S. East Coast trade.
With an estimated market share of 9%, ZIM Integrated Shipping Services is already a leading player in that trade – and the Seaspan alliance should only serve to enhance ZIM’s market footprint.
Unfortunately, the positive impact on the LNG market won’t be immediate, as vessel delivery to ZIM is expected between February 2023 and January 2024.
Still, as ZIM Integrated Shipping Services President and CEO Eli Glickman explained, this arrangement will enable ZIM to “meet growing market demand on the Asia – US East Coast trade and provide top-level, reliable service to our customers on this important trade lane.”
Wall Street’s Take
According to TipRanks’ analyst rating consensus, ZIM is a Hold, based on one Buy, one Hold, and one Sell rating. The average ZIM Integrated Shipping Services price target is $59.27, implying 2% upside potential.
The Takeaway
Clearly, there’s a lot to like about ZIM Integrated Shipping Services. The company’s shares are trading at an ultra-low valuation, while the company pays out a huge dividend.
Plus, ZIM is well-positioned to help alleviate global supply-chain issues. Truly, ZIM Integrated Shipping Services is an established innovator that deserves strong consideration for anyone’s long-term international stock portfolio.
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