Israeli container line Zim is "not done yet" in terms of its profit potential in rising markets, analysts believe.
Norwegian investment bank Fearnley Securities called the boxship operator's model a "gold mine", with 2021 Ebitda tipped to come in above $5bn.
Analysts Peder Nicolai Jarlsby, Erik Gabriel Hovi and Ulrik Mannhart said that as the underlying market strength continues to show signs of extending into and potentially through 2022, Zim still has further to go in terms of earnings.
Fearnleys has a "buy" rating on the company and has raised the target price for the New York-listed stock to $67, against $54 now.
There is a potential upside to $85 should market inefficiencies be prolonged throughout 2022, they added.
Zim is well-positioned to capitalise on congestion at terminals, the investment bank believes.
"Structural and unresolved supply-chain inefficiencies in the West are maintaining the elevated container market, especially on the main East-West lanes, and we are seeing more signs for a similarly situated market in 2022 if ports are not able to pick up the slack," analysts said.
Costs under control
Developments in 2022 remain uncertain, but there is potential for early talks on transpacific contract negotiations, Fearnleys argued.
This should "add some comfort" to earnings estimates, the analysts said.
"Additionally, the cost side has been kept under control for now, with cost per teu only up by 11% year on year, while freight has more than doubled," they added.
Zim has talked of increasing exposure in Asia. Fearnleys said some form of merger or acquisition would make sense here.
But the analysts argued a focus on dividends is what would really drive up the share price.
Room for both
"There should be room for both given an estimated 2021 cash balance of $3bn and current gross debt of only $2.4bn," they added.
Fearnleys' 2022 Ebitda estimate for Zim has been increased to $2.9bn from $2.6bn.
On 1 September, Zim said it was taking its tally of 7,000-teu boxships to be chartered from leading containership owner Seaspan Corp up to 15 ships.
The owner exercised options worth $750m to charter five more of the LNG-fuelled vessels from the world's largest boxship tonnage provider.
Seaspan did not name the yard, but said the ships will be built for $530m.
