INDEPENDENT NEWS

Port of Tauranga outlook favourable

Published: Wed 13 Jun 2018 03:59 PM
Port of Tauranga outlook favourable but shares have baked in too much growth, rated 'sell'
By Tina Morrison
June 13 (BusinessDesk) - Port of Tauranga is a high-quality company lauded as the most productive and efficient port in Australasia but its shares are too expensive, according to Morningstar which recommends investors sell the stock.
The port company's shares recently traded at $5.13, a significant premium to Morningstar's $3.80 fair value estimate. The research house has a one-star rating on the stock, which indicates the market is pricing in an excessively optimistic outlook and encourages investors to strongly consider exiting the stock. Other analysts agree, with four having a 'sell' rating on the stock and one a 'strong sell', with a median price target of $3.80, according to Reuters data.
"Port of Tauranga is a high-quality company," Morningstar analyst Adrian Atkins said in a June 12 research note. "While the firm is in a favourable position with a virtuous outlook, the prevailing share price has baked in too much growth."
The port is the country's largest for cargo volume and second largest for container throughput, and Morningstar notes it runs at a cost advantage to other ports in the country due to its lower-cost non-union workforce and large-scale operations. It's set to benefit in the future as larger international ships call at fewer ports, expected to prompt a rationalisation in New Zealand to two hub ports servicing the North Island and the South Island and increased use of rail and coastal shipping.
"The competitive advantages in New Zealand's largest port are undoubtedly compelling," Atkins said. "As port operations rationalise, and as the only port in New Zealand capable of accommodating larger cargo ships, we expect Port of Tauranga will continue to win share from competitors. Fortunately, it has ample land to accommodate expansion."
Still, despite the rosy outlook for the company, Morningstar notes Port of Tauranga is trading on a "mediocre" fiscal 2018 dividend yield of 3.5 percent including special dividends, and the research house forecasts a fiscal 2019 dividend yield of 3.7 percent, falling to 3 percent in fiscal 2020 as special dividends finish.
With the shares trading on a forward price to earnings ratio of more than 37 times "significant growth is already priced in" and "overly optimistic", Atkins said in his note titled 'Port of Tauranga is a High-Quality Company ...But Wait for a Better Price'.
(BusinessDesk)
ends
BusinessDesk
Independent, Trustworthy New Zealand Business News
The Wellington-based BusinessDesk team provides a daily news feed for a serious business audience.
Contact BusinessDesk
Email:

Next in Business, Science, and Tech

Waste work programme to tackle tough problems
By: New Zealand Government
Foreign buyers ban passes third reading
By: New Zealand Government
Fairfax slashes value of NZ business as Nine merger looms
By: BusinessDesk
Commission to sue Viagogo
By: Commerce Commission
Fonterra CEO Spierings goes early after milk price trimmed
By: BusinessDesk
Tyres pollution: Some collectors ignore disposal rules
By: RNZ
Concrete solutions to Auckland’s construction waste
By: New Zealand Government
Greens all talk, no action
By: New Zealand National Party
Councils back the Government’s waste work programme
By: Local Government NZ
Waste levy hike has nothing to do with the environment
By: New Zealand Taxpayers' Union
NZ First Welcomes First Step in Addressing Foreign Ownership
By: New Zealand First Party
REINZ is disappointed foreign buyer ban passes third reading
By: REINZ
KiwiBuild puts the housing market at risk
By: New Zealand National Party
Urban Growth Agenda Warrants Bi-Partisan Support
By: Infrastructure NZ
Consumer NZ welcomes action against Viagogo
By: Consumer NZ
View as: DESKTOP | MOBILEWe're in BETA! Send Feedback © Scoop Media