THREAD #boxships

Israeli container line $ZIM could yet make $1bn more profit than analysts have been forecasting this year.

Amid record charter and freight rates, Fearnley Securities revealed the possibility as it hosted a call with chief financial officer Xavier Destriau.

The call emphasised that "maybe contrary to many beliefs, Zim actually thrives in this kind of operating environment because of the large gap between freight and time-charter costs," said analysts Espen Landmark Fjermestad, Peder Nicolai Jarlsby and Ulrik Mannhart.

This also explains why the liner operator was very eager to add capacity between the last three months of 2020 and the first quarter of this year, because of visibility on the freight side, they added.

The Q1 result is due in May. Fearnley expects "good Q3 earnings visibility".

Big hike in forecast earnings

The analysts said Ebitda for the whole year should now be $2bn, up from its previous estimate of $1.5bn.

Fearnley continues to see a potential upside bringing this figure towards $2.5bn.

One factor creating uncertainty is what "normalised" earnings will look like for $ZIM when markets come off the peak. Next year could see Ebitda of more than $1bn in a "very disciplined" liner industry, the analysts said.

Fearnley has a BUY rating on the stock, with a target price of $45 per share, against around $30 now. Zim's Q4 profit was its best ever financial result on the back of a massive upturn in freight rates and volumes.

The Israeli liner operator racked up net income of $366.4m, compared with just $1.2m in the same period in 2019. Revenue rose 64% to $1.36bn over the period, lifted by higher freight rates and volumes.

Haifa-based Zim, which raised $204m through an initial public offering (...)

on the New York Stock Exchange in February, sees no imminent end to the good performance.

The company's own forecast is for Ebitda of between $1.4bn and $1.6bn in 2021.

$ZIM charters in nearly all its fleet of 87 containerships.

They transported 799,000 teu in the final three months of 2020, up more than 100,000 teu on the previous period.

Average freight rates soared to $1,518 per teu over the period, up from $1,017 per teu for the same quarter in 2019.

Read the bull case: https://seekingalpha.com/article/4404654-zim-integrated-shipping-services-ipo-offers-60-percent-upside

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