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Talking Zim After Record Dividend

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ZIM Integrated Shpping (ZIM.US), the company from freight shipping industry is losing more than 25% today before the open. The reason for the decline is ‘ex-date’ i.e. the day the dividend of $6.4 is cut from the share price. Despite the economic slowdown and falling freight prices, 2022 EBITDA for ZIM was more than $7.5 billion (14% y/y growth), and revenues grew nearly 20% y/y. With the perspective of China’s reopening, will bulls quickly drive ZIM’s stock upward? 

  • The company has indicated that freight rates are near the bottom, and despite the slowdown, its 2023 delivery volumes will increase. ZIM intends to integrate with blockchain payments and logistics technology, which will give it a larger share of the e-commerce market;
  • Q4 results beat analysts’ expectations with a high net margin of over 36% and a return on assets (ROE) of over 80%. The company has a solid balance sheet with more than $4.6 billion in cash;
  • At the same time, ZIM estimates that it will remain profitable this year with EBITDA in the range of between $1.8 and $2.2 billion. The company estimates it will return between 30% and 50% of its revenues in dividends in 2023;
  • As demand deteriorates, the company, may have to cut dividends. Shipping giant Maersk (MAERSKA.DK) posted strong financial results with EBIT above $30 billion but warned that profit in 2023 will drop significantly. With the giant’s weakness expected, investors remain cautious on smaller shipping companies.

The Freight Index shows that the price of shipping a standard container is continuously in a downward trend. At the same time, the Baltic Dry Index, which tracks the freight of dry commodities like iron ore and grain, has entered a slight correction. Source: Drewry

The company has shared high dividends with investors since mid-2021. On the one hand, this is a positive sign of the company’s willingness to share sizable profits, but on the other hand it shows that the company may not have an idea or see the point in reinvesting capital. Source: TipRanksZIM (ZIM.US), H4 interval. After the dividend cut, the opening indicates levels near $17.5 per share by which the first task for bulls may be to try to get back above the SMA200 (red line) and the 71.6 Fibo elimination of the upward wave initiated in the fall of 2022. Source: xStation5

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