ZIM - ZIM Integrated: Why A Rich Special Dividend May Be In The Cards For 2024

2024-01-22 13:05:42 ET

Summary

• ZIM Integrated is benefiting from disruptions in the Red Sea, leading to increased freight rates and potential capacity shortages.
• Container rates are approaching COVID-like levels, with ZIM having previously rewarded shareholders with dividends during high rates.
• Analyst estimates for ZIM may be too low, failing to reflect the impact of the Red Sea disruptions.
• Given the likelihood of a (rich) special dividend in 2024, I assign a speculative "Strong Buy" rating.

ZIM Integrated ( ZIM ) is a main beneficiary of the current turmoil in the Red Sea, which is significantly disrupting container shipping and consequently leading to a noticeable increase in freight rates. Investors should consider that a major portion of Europe-Asia maritime trade passes through the Red Sea. In fact, it is estimated that approximately 30% of all container volume between Europe and Asia transits through the Suez Canal. If such a high trade volume would be diverted to pass the Cape of Good Hope, there would certainly be an enormous capacity shortage of shipping containers, as existing supply is locked-in for materially longer routes....

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