ZIM Integrated Shipping Services Ltd.

ZIM Details

ZIM Integrated Shipping Services Ltd. (NYSE: ZIM) is an Israel-based asset-light container shipping company offering multi-modal cargo handling, tariff management, schedule information, and other related services globally. As of December 31, 2020, it operated a fleet of 87 vessels and chartered 98.7% of its twenty-foot equivalent unit (TEU) capacity and 98.9% of vessels in its fleet. ZIM deployed an additional 11 vessels between December 31, 2020, and February 28, 2021, to cater to increased global demand.  The company's ordinary shares were listed on NYSE on January 28, 2021, at an issue price of USD 15.00 per share. As of July 26, 2021, its market capitalization stood at USD 4.35 billion.

Enhancing the Operating Fleet: On July 06, 2021, ZIM signed a long-term charter for ten 7,000 TEU Dual-Fuel LNG containership vessels, for a value of ~USD 1.5 billion with Seaspan Corporation, which will benefit ZIM's global operations. Vessel deliveries are expected to commence in Q4FY23 and continue in FY24. ZIM and Seaspan also signed a long-term charter arrangement for 10 LNG-fueled 15,000 TEU boats in February 2021.

Extending Commercial Collab with Alibaba: On June 21, 2021, ZIM extended its collaboration with a business unit of Alibaba Group for two additional years (until 2023). The extended collaboration will allow Alibaba.com buyers and sellers to purchase sea freight and logistic services from ZIM’s Chinese subsidiary.

Q1FY21 Results: The company reported a surge of 111.89% in total revenue to USD 1,744.33 million in Q1FY21 (ending March 31, 2021) compared to USD 823.21 million in Q1FY20, attributable to an increase in shipping volumes and improvement in freight rates. In Q1FY21, ZIM reported the total carried volume of 818,000 TEUs (up 28% YoY) at an average freight rate of 1,925 USD/TEU (up 76% YoY). Net income was USD 589.59 million in Q1FY21 vs. net loss of USD 11.92 million in Q1FY20. As of March 31, 2021, the company had cash & cash equivalents (Including Short term investments) of USD 1,251.42 million with a total debt of 2,141.17 million.

Key Risks: The container segment of the shipping industry is volatile and cyclical in nature, and any prolonged fluctuations in freight rates and bunker prices could harm ZIM’s financials. In addition, the company faces direct competition from established players like Maersk, COSCO Shipping, and others, in the digital shipping industry. Furthermore, ZIM's top 10 and 50 customers accounted for 16% and 34% of its freight revenues in FY20. The loss of any of these key customers could hurt the company’s financial operations. Also, ZIM derives a significant portion of its revenue from China. If trade tensions persist between the U.S. and China, it may impact its operational performance.

Outlook: For FY21, the company expects its EBITDA to range between USD 2.5 - 2.8 billion, with EBIT ranging between USD 1.85 - 2.15 billion. This guidance rides on anticipated improvements in all revenue metrics (volume, average freight and charter rate and average bunker price).

Valuation Methodology: Price/Earnings Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ZIM Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: ZIM's stock price has increased 6.40% in the past 3 months, and is currently leaning towards the higher end of the 52-week range of USD 11.34 to USD 49.90. The stock is currently trading below its 50 DMA level, and its RSI Index is 39.52. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 32.25. Considering the uptick in the stock price, we believe the current share price abundantly reflects the company’s fundamentals and have chosen to remain on the sidelines. Therefore, we recommend an “Expensive” rating on the stock at the closing price of USD 36.25, down 4.13% as of July 26, 2021.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV.

TEGNA Inc.

TGNA Details

TEGNA Inc. (NYSE: TGNA) is a media company with a portfolio of broadcast stations and digital sites. It operates 64 television stations in 51 U.S. markets and reaches ~39% of U.S. households. Its revenues are categorized into 1) Subscription, which includes fees paid by satellite, cable, over-the-top (OTT), and telecommunications providers to carry the company’s television signals on their systems, 2) Advertising & Marketing Services (AMS), which offers non-political television advertising, digital marketing services, and advertising on the stations, 3) Political advertising, that is driven by even-year election cycles at the local and national level, and 4) Other services, including the production of programming and advertising materials. In addition, TGNA also owns multicast networks such as True Crime Network and Quest.

Step Towards an Immersive Experience: On July 08, 2021, TGNA and five other Sacramento television stations joined together to launch Nextgen TV, allowing TV stations to customize their broadcasts with informative and interactive elements. This news follows the earlier collaboration between 5 local TV stations on July 07, 2021, to launch Nextgen TV in Charlotte.

Cross-Platform Partnership with TVSquared: On June 10, 2021, the company announced a partnership with TVSquared, which will deliver cross-platform, closed-loop, and OTT measurements and provide thousands of TGNA’S advertisers with expansive reach and app outcomes for local television and CTV and OTT campaigns.

Q1FY21 Results: The company reported a slight increase of 6.26% in total revenue to USD 727.05 million in Q1FY21 (ended March 31, 2021) compared to USD 684.19 million in Q1FY20. The Subscription segment, which accounted for 53.19% of the revenue in Q1FY21, grew 16.21% YoY due to annual rate increases under existing and newly renegotiated retransmission agreements. The impact of the strong performance of topline reflected on adjusted EBITDA, which reported a 9.55% YoY growth to USD 243.03 million in Q1FY21. The net income for Q1FY21 was USD 112.62 million, 30.48% higher than USD 86.31 million in Q1FY20. As of March 31, 2021, TGNA’s cash and cash equivalents were USD 12.85 million, with total debt amounting to USD 3.52 billion.

Key Risks: In FY20, television spots and digital advertising, which are dependent upon the strength of the U.S. economy, accounted for 40% of the company's revenues. Any unfavorable changes in the economic environment could impair TGNA’s financial performance. In addition, TGNA relies excessively on its information technology (IT) systems to manage business data, communications, news and advertising content, and other business processes. Disruptions in broadcasting, transaction errors, and processing inefficiencies due to failure in the IT performance could adversely impact its financial performance.

Outlook: In % terms, TGNA expects the growth in its revenue to be in the mid-to-high twenties and non-GAAP operating expenses to increase in low-double digits. In FY21, it anticipates YoY growth of mid-to-high teens in subscription revenue (in % terms) and capital expenditure of USD 64 – 69 million.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

TGNA Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: TGNA has increased 8.57% and 35.97% in the past 6 and 9 months, respectively. It is currently trading in the mid-band of the 52-week range of USD 11.26 to USD 21.52. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is 37.19. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 14.41. Despite the strong track record and promising growth prospects, we have chosen to remain on the sidelines and will reevaluate the thesis upon improvement in debt metrics and associated risks. Therefore, we recommend an “Avoid” rating on the stock at the current price of USD 17.35, up 0.29% as of July 26, 2021, 12.03 PM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.