Israeli ocean carrier ZIM Integrated Shipping Services is striking while the iron is hot and moving fast on its initial public offering (IPO). It plans to price its offering and list its stock on the New York Stock Exchange (NYSE) in just a few days — on Jan. 27. The U.S. investor roadshow is now underway.
According to its newly revised prospectus, ZIM plans to sell 17.5 million shares at a target price of $16-$19 each. Gross proceeds would be $306.5 million at the target-range midpoint ($17.50 per share).
IPO investors would own 14.9% of the outstanding shares. A total of 117.5 million shares would be outstanding after the IPO. Based on the midpoint price, ZIM is targeting a market capitalization of $2.056 billion.
ZIM estimated that net proceeds would be $281.9 million after expenses, or $324.8 million if the underwriter over-allotment is fully exercised.
During the roadshow presentation to investors, ZIM CFO Xavier Deistriau explained that net proceeds could be used to secure long-term lease agreements for larger ships to serve the Asia-West Coast trade, to buy more containers and to invest more in digital tools.
The prospectus said the company could charter ships with capacity of up to 15,000 twenty-foot equivalent units (TEUs) for the trans-Pacific trade.
The latest prospectus, filed on Tuesday, offers fresh details on ZIM’s business that were not included in its Dec. 30 registration statement (see in-depth coverage of earlier registration here).
Fleet size jumps on new charters
The new filing reveals that ZIM has been on a chartering spree in recent months.
Unlike its peers, ZIM does not own roughly half its fleet and charter the rest. Rather, it charters virtually its entire fleet.
As previously reported, ZIM operated 70 vessels (including two vehicle transport ships and 68 container ships) as of Sept. 31, with all but one of those chartered. Of its chartered-in capacity, 71% had a lease duration of one year or less. Container capacity at that time was 330,300 TEUs.
The newly revised prospectus reveals that ZIM chartered 26 additional ships since Oct. 1. It now has 96 vessels (three vehicle carriers, 93 box ships). Total container capacity is 406,502 TEUs. The share of ships chartered for a year or less is 60%.
Over the course of the past three and a half months, ZIM has boosted its capacity by 23%. This chartering surge coincided with a period of historically high charter rates, implying higher lease expenses ahead.
Preliminary Q4 and full-year results
ZIM has not yet closed out its Q4 2020 financials, but the roadshow presentation and the new prospectus provided preliminary estimates.
The company is expecting net income for Q4 2020 of $342 million-$367 million. This would bring full-year net income to $500 million-$525 million, compared to a net loss of $13 million in 2019.
ZIM expects adjusted earnings before interest and taxes (EBIT) will be $703 million-$733 million, almost five times 2019 EBIT.
The liner operator estimated that it carried 783,000-813,000 TEUs in Q4 2020, bringing the full-year total to 2.825 million-2.855 million. That’s essentially flat with 2019, up around 1%.
The big gains came from freight rates. It estimated its 2020 rates averaged $1,222-$1,234 per TEU, up 17%-18% year-on-year.
In the negative column, ZIM estimated that its outstanding debt as of Dec. 31, 2020, would be $1.847 billion-$1.912 billion, up 13%-16% from the end of 2019. Click for more FreightWaves/American Shipper articles by Greg Miller
MORE ON SHIPPING STOCKS: ZIM goes to Wall Street: Will IPO stars align? See story here. Wall Street’s incredible shrinking shipping stocks: see story here. Container rates are on fire. How can you invest in that? See story here.