Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Capital Markets

ZIM Integrated Shipping Services / Equity Capital Markets

<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/183/499/original/BANNER-ECM.png?1611103790" class="editor-image img-responsive" data-smartkarma-image-id="183499"></figure></section><p>On the afternoon of January 19th, <a href="https://www.smartkarma.com/entities/zim-integrated-shipping-services-ltd" target="_blank" data-smartkarma-citation="entities:31124:1" rel="noopener">ZIM Integrated Shipping Services (ZIM US)</a> filed an updated prospectus, which includes preliminary 2020 financials and details of its planned IPO.</p><p>At the proposed US$16-19 per share IPO price range, ZIM appears reasonably price compared to peers <a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a> and <a href="https://www.smartkarma.com/entities/ap-moeller-maersk-a-s" target="_blank" data-smartkarma-citation="entities:22428:1" rel="noopener">AP Moeller - Maersk A/S (MAERSKB DC)</a>. The smaller of these comparables, mid-sized Taiwanese "pure play" Evergreen, may be a better comp for ZIM than industry giant Maersk, which also has significant non-container shipping revenues. </p><p>Current data suggest container shipping market conditions will remain strong in the near-term, but we believe some risks to that positive narrative are emerging. Chief among these risks are rising fuel costs and weaker-than-expected US retail sales. It may be that ZIM is pricing its IPO aggressively in order to quickly complete its listing before these risks become more tangible.</p><p>A bigger question is, do investors really want to increase exposure to the container shipping industry near the cycle's peak?</p>

On the afternoon of January 19th, ZIM Integrated Shipping Services (ZIM US) filed an updated prospectus, which includes preliminary 2020 financials and details of its planned IPO.At the proposed US$16-19 per share IPO price range, ZIM appears reasonably price compared to peers Evergreen Marine Corp (2603 TT) and AP Moeller - Maersk A/S (MAERSKB DC). The smaller of these comparables, mid-sized Taiwanese "pure play" Evergreen, may be a better comp for ZIM than industry giant Maersk, which also has significant non-container shipping revenues. Current data suggest container shipping market conditions will remain strong in the near-term, but we believe some risks to that positive narrative are emerging. Chief among these risks are rising fuel costs and weaker-than-expected US retail sales. It may be that ZIM is pricing its IPO aggressively in order to quickly complete its listing before these risks become more tangible.A bigger question is, do investors really want to increase exposure to the container shipping industry near the cycle's peak?

ZIM at IPO Price Range Looks Reasonable Vs Peers, But Should Investors Add Container Exposure Now?

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<p>Israel's ZIM Integrated Shipping Services (proposed ticker ZIM US) has filed documents to launch an IPO in the US. Media reports have speculated the container shipping company hopes to raise at least US$100 mn in the deal; some reports say ZIM could try to raise US$300 mn or more.</p>
<p>The objective of this note is to provide some context for the company and the global container shipping industry. After all, it has been over two decades since a global container ship operator has traded in the US (<a href="https://www.smartkarma.com/entities/matson-inc" target="_blank" data-smartkarma-citation="entities:6335:1" rel="noopener">Matson Inc (MATX US)</a> focuses on niche domestic US markets, generally).</p>
<p>ZIM is a small player in global container shipping, and contrary to its claims the company mainly operates in highly competitive segments. Its "asset-light" model is unusual, but it represents a double-edged sword: chartering in the majority of its capacity offers flexibility, but it also means operating costs may rise in tandem with freight rates over the cycle, limiting margin expansion. </p>
<p>Fortunately, Europe and Asia offer several direct comps for ZIM, including <a href="https://www.smartkarma.com/entities/ap-moeller-maersk-a-s" target="_blank" data-smartkarma-citation="entities:22428:1" rel="noopener">AP Moeller - Maersk A/S (MAERSKB DC)</a> of Denmark and <a href="https://www.smartkarma.com/entities/evergreen-marine-corp-ltd" target="_blank" data-smartkarma-citation="entities:15428:1" rel="noopener">Evergreen Marine Corp (2603 TT)</a> of Taiwan. These two companies -- both of them far larger than ZIM, and more profitable over the cycle -- will serve as useful benchmarks once ZIM and its bankers announce details regarding deal size and pricing. </p>




Israel's ZIM Integrated Shipping Services (proposed ticker ZIM US) has filed documents to launch an IPO in the US. Media reports have speculated the container shipping company hopes to raise at least US$100 mn in the deal; some reports say ZIM could try to raise US$300 mn or more.
The objective of this note is to provide some context for the company and the global container shipping industry. After all, it has been over two decades since a global container ship operator has traded in the US (Matson Inc (MATX US) focuses on niche domestic US markets, generally).
ZIM is a small player in global container shipping, and contrary to its claims the company mainly operates in highly competitive segments. Its "asset-light" model is unusual, but it represents a double-edged sword: chartering in the majority of its capacity offers flexibility, but it also means operating costs may rise in tandem with freight rates over the cycle, limiting margin expansion. 
Fortunately, Europe and Asia offer several direct comps for ZIM, including AP Moeller - Maersk A/S (MAERSKB DC) of Denmark and Evergreen Marine Corp (2603 TT) of Taiwan. These two companies -- both of them far larger than ZIM, and more profitable over the cycle -- will serve as useful benchmarks once ZIM and its bankers announce details regarding deal size and pricing. 

Planned ZIM IPO: Opportunistic Listing Near Cycle Peak for Minor Industry Player

Israel

ZIM Integrated Shipping Services Ltd provides shipping services. The Company offers multi-modal, cargo handling, tariff management, schedule information, and other related services. ZIM Integrated Shipping Services serves clients worldwide.

ZIM Integrated Shipping Services (ZIM US)

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ZIM Integrated Shipping Services (ZIM US)

ZIM at IPO Price Range Looks Reasonable Vs Peers, But Should Investors Add Container Exposure Now?

ZIM at the mid-point of its IPO price range does not look expensive, but the bigger question is: why add container exposure near the peak of the...

Tracking Traffic

Planned ZIM IPO: Opportunistic Listing Near Cycle Peak for Minor Industry Player

ZIM is pursuing an IPO in the US as the container shipping cycle is approaching a peak. In this note we attempt to give investors context that...

Tracking Traffic

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