ZIM - Danaos Post Q1 Earnings: Raising Fair Value Estimate

• Danaos Corp is one of my top picks. With nearly the entire fleet now fixed on medium- and long-term charters, the risk/reward setup is the best in years.
• Results have been outstanding. DAC reported $11.36/sh EPS for Q1-22. Excluding the significant contribution from ZIM, core EPS was approximately $6.05, exceeding our $5.50-$5.60 pre-earnings estimate.
• Danaos trimmed 1.5M ZIM shares for $85.3M in April (avg. $56.90/sh). As of mid-May, they still hold 5.7M shares in ZIM, which they will likely continue to monetize this year.
• Management has continued to prioritize balance sheet strength. During Q2, DAC has committed to prepay $437M of debt and leasing obligations.
• Our latest ‘fair value estimate’ is now $125/sh (49% implied upside), which includes a hefty discount from our estimate of $160/sh adj. NAV.

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