Port of Tauranga Limited

This report is an updated version of the report published on 13^th June 2022 at 6:19 PM (GMT +12)

Port of Tauranga Limited

Company Overview: Port of Tauranga Limited (NZX: POT) is the natural gateway to and from international markets for several businesses of New Zealand. The port’s location is vital to the key commodity exports sources. It also has direct and dedicated access to New Zealand’s largest import market.

POT Details

The market capitalisation of the company stood at ~$4.27 billion on 13^th June 2022.

Looking at the past performance over FY17 to FY21, POT’s top line grew with a compounded annual growth rate (CAGR) of 7.2%. Total Revenue of the company improved from $255.9 million in FY17 to $338.3 million in FY21. Net Income improved from $83.4 million in FY17 to $102.4 million in FY21.

Exhibit 1: Financial Statistics

Source: Analysis by Kalkine Group

Result Performance for H1FY22 (For the Half-Year Ended 31 December 2021)

• The company’s total operating revenue increased to $186.0 million, up by 16.7% driven by changes in container mix and higher per container revenue.
• Group net profit after tax grew by 15.6% YoY to $56.3 million driven by steady cargo volumes at 13.0 million tonnes and 1.5% rise in container numbers volume to 622,271 TEUs.
• The board has declared a fully imputed interim dividend of 6.5 cents per share, an increase of 8.3% over the pcp.

Inland Port to Boost Capacity

The company’s inland port at Ruakura near central Hamilton is under progress that will provide a significant opportunity to increase capacity and alleviate congestion in the short term. This joint venture with Tainui Group Holdings is part of the Ruakura Superhub industrial complex and is slated to complete later this year. The inland port will aid in handling cargo flow and reduce the storage durations at the Tauranga Container Terminal.

Key Update

• On 1 April 2022, the company provided a notice with regards to the financial assistance offered to certain eligible employees in connection with the Employee Share Purchase Scheme of the company. The company has provided financial assistance for a total of 169,289 number of shares. An overall consideration of $1.03 million was paid by the Trustee towards the issue of the relevant shares, and these shares were later allocated to employees at a 10% discount.

Top 10 Shareholders: 

The top 10 shareholders have been highlighted in the table, which together forms ~55.98% of the total shareholding.

Exhibit 2: Top 10 Shareholders

Source: Analysis by Kalkine Group

A Quick Look at Key Metrics:

The company has posted an improvement in Gross margin over FY17-21 to reach 76.1% in FY21, from 75.7%. The company has posted an uptick in current ratio to 0.23x in FY21 from 0.17x in FY17. However, ROE has reduced to 7.9% in FY21 from 9.2% in FY17 but has improved from 7.4% in FY20.

Exhibit 3: Key Metrics

Analysis by Kalkine Group

Outlook:

The company remains uncertain about the outlook for H2FY22 due to uncertainties revolving around the supply chain disruption. Also, the full effects of the Omicron outbreak are yet to be seen. The company expects the port congestion to sustain for the rest of FY22.

Considering its H1FY22 performance, the management has guided to achieve FY22 earnings in the range of $103 million and $110 million (versus $102.4 million in FY21).

Risks:

The company’s business is exposed to the risk of changes in government and regulator policies. Further, physical risks due to the effect of climate change like increased severity and occurrence of extreme weather events also remain a key challenge.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Technical Overview: 

Chart:

Source: REFINITIV

Note: Purple Color Line Reflects RSI (14-Period)

Stock Performance:

The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and the target price so arrived reflects a rise of low double-digit (in % terms). A slight premium has been applied to EV/Sales Multiple (NTM) (Peer Average) considering its diversity of cargoes as well as income streams and decent outlook.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Considering the aforementioned factors, a “Buy” rating has been assigned on the stock at the current market price of $6.210 per share (New Zealand Time: 4:10 PM (GMT +12)) as on 13^th June 2022.

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer

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