$ZIM - Playing spot exposure of containerships

To make sure it’s clear, the dividend this quarter will be in the $2-3 range. I would expect much less of a run/dip for the Q1 than the much larger Q4 div.

With that said, I think ZIM and other shipping stocks were pushed down too far lately and they have a run coming…

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ZIM continues to perform beautifully compared to the rest of the market.

Yesterday would have been another good day to buy, but today is second best, so have set a limit buy for 6/17 75C. ZIM does +/- 5% easy on any given day so hoping for a better price. Will release before earnings in two weeks.

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This filled easily near close on Friday, and is down 50% already, what with ZIM falling 14% and its not even 11.30am (!), so got another 6/17 75C for 1.25. Earnings are in 10 days, ish. Assuming there’ll be a bounce around there, unless market completely capitulates.

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GSL, a ZIM peer (ish), had amazing earnings:
https://seekingalpha.com/pr/18783722-global-ship-lease-reports-results-for-first-quarter-of-2022

  • Global Ship Lease press release (NYSE:GSL): Q1 Non-GAAP EPS of $1.91.
  • Revenue of $153.63M (+110.5% Y/Y).
  • Generated $94.5 million of Adjusted EBITDA for the first quarter 2022, 2.1 times Adjusted EBITDA of $44.2 million for the prior year period.

Phenomenal numbers for a $850M market cap company.

ZIM and DAC should follow during earnings next week.

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Looking at GSL, it’s shares really didn’t move up much at all on the positive earnings. In fact, after a very brief rally to ~$24, it crashed to around $21.50 where it still sits about 2 days later.

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Shot:

Chaser:
https://twitter.com/mintzmyer/status/1525881186131714048

Also, rates kept steady last week and Shanghai to LA actually crept up a wee bit.

ZIM earnings 5/18 pre-market. Should be good. Wouldn’t be surprised if it sees $70.

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Thanks @The_Ni , I am holding some shares and calls so looking forward to that possibility of $70.

To place this here on shipping, longer term outlook based on Allianz (larger insurance carrier for shipping cos). More of a part of our Ukraine forum but still applies to Zim.

https://www.agcs.allianz.com/news-and-insights/expert-risk-articles/shipping-safety-22-ukraine-war.html

Curious to see how this plays out tomorrow considering ZIM’s price action recently. It will be interesting to see if it acts differently to its earnings compared to how some other freight have been. Good luck to all holding some positions here.

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ZIM’s movement today was not very inspiring with the constant downtrend. I figured better to just wait till tomorrow to see what the results are and play the movement off of it.

Fingers crossed the lockdowns in China get lifted sooner rather than later.

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Really was baffling to see it move down today. Had been on a pretty solid up turn and thought it might get some sympathy or outlook with DAC solid earnings. But DAC was also down overall. Have 1 June 17 70c. So hopefully we get some good news in AM. This is one of those companies I feel is wrongly beaten down and is below fair value.

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ZIM beat earnings handily, but is somehow down.

ZIM Integrated Shipping Services press release (NYSE:ZIM): Q1 GAAP EPS of $14.19 beats by $1.38.
Revenue of $3.72B (+113.8% Y/Y) beats by $230M.
Adjusted EBITDA for the first quarter was $2,533 million, a year-over-year increase of 209%
Operating income (EBIT) for the first quarter was $2,243 million, a year-over-year increase of 228%
Updated Full-Year 2022 Guidance: The Company increased its previously provided guidance for the full-year 2022 and now expects to generate Adjusted EBITDA of between $7.8 billion and $8.2 billion and Adjusted EBIT of between $6.3 billion and $6.7 billion.

As JM notes, its trading at EPS+Cash. Absurb.

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Shouldn’t fight the trend though… so not buying in just yet. Will hold for Shanghai to open and see how freight rates respond.

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ZIM is doing the right thing today and moving up, after that impressive earnings beat.

Nevertheless, it is affected by sentiment and this piece which came out yesterday probably did not help. (Freightwaves is apparently widely followed in the logistics industry)

They make the case that spot rates are going down and may get to point where they replace contracted rates.
25% of ZIM’s volume is contracted and the rest are spot, so they do have some exposure to this, as per the earnings transcript. (Which has some other useful information too.)

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That spot rate has been going down recently. Everyone is pinning hopes on Shanghai reopening for them to rise again.

All in all, need to keep an eye on those rates - ZIM will follow them pretty closely.

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Looks like they are starting to lift the lockdown in Shanghai, this could be bullish for ZIM and other pacific shippers.

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It hit 62 today which was probably a good entry. I’m waiting until below 60. Best luck.

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FreightWaves came out with this piece today, that says:

The latest ocean container bookings data reveals that despite the strong levels of inbound cargo during the first five months of 2022, import demand is not just softening — it’s dropping off a cliff. Because capacity on the trans-Pacific has remained relatively stable, Drewry’s container spot rates from China to the West Coast have plunged 41% month-over-month to $9,630.

Freight forwarders will enjoy expanding margins on ocean freight, while U.S. trucking carriers and intermodal volume providers may start to see volume risks.

Consumer buying patterns are rapidly normalizing to pre-COVID levels, and U.S. retailers are stuck with too much inventory. Target (NYSE: TGT) shares dropped Tuesday morning after executives said the company would mark down unwanted items, cancel purchase orders and move quickly to get rid of excess inventory.

Container imports bound for the U.S. have dropped over 36% since May 24. (This index measures departing container volumes at the port of origin). This is a troubling sign for domestic U.S. freight markets that have been benefiting from an unprecedented surge of containerized import volumes over the last 18 months. Since ocean transit times for these inbound container volumes have recently been averaging between 30 and 35 days, we will begin seeing the softer volumes show up at U.S. ports in the first couple of weeks of July.

They note the following reasons - details in the post:

  • There is inventory glut from consumers reverting back from goods to services
  • Consumer is “getting crushed” (added quotes as not sure of the solidity of their argument - consumers take credit also when they feel good about their finances)
  • The Shanghai container surge we’re expecting with reopening will not happen because most of those were routed to other ports

The Drewry Index has remained flat while the Baltic Index has actually gone down, so at the very least, the data does not contradict what FW is saying.

Let’s keep an eye on this, and if the Shanghai reopening bump doesn’t show up in a week or two, we might have to consider that the good times in containerships is over for now.

In terms of positions, will wind down the outstanding call I have, though will hold on to the ZIM commons as their cost basis makes the dividend still way worth it.

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Looks like Zim dividend paid out today just parking here… forgot I got those two little shares back from the bigger dividend was paid out

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image

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https://twitter.com/VesselsValue/status/1534472878749515776

A lot of these ships should start showing up on the US coasts in four to six weeks. Some (myself included until recently) were hoping for spot container rates to move as a result. If they do not, FreightWave’s interpretation will have been proved to be accurate - that between bloated inventory and rerouting to other ports, this is not the catalyst we were hoping it would be.

There may still be a positive impact in a month on internal trucking/logistics, that we are tracking here.

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back in with a small position

https://seekingalpha.com/article/4517500-zim-dont-buy-the-muppet-show-induced-turmoil-buy-the-company

Biased but a good read.

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