Napier Port share offer $2.27-$2.60; will raise net $110 million
By Gavin Evans
July 15 (BusinessDesk) - Napier Port expects to raise up to $234 million from the planned sale of 45 percent of the
business through a public share offer.
The offer, indicatively priced at $2.27 to $2.60 a share, will raise gross proceeds of $204.3 million to $234 million.
After expected costs of $14 million, and $80 million for current owner Hawke’s Bay Regional Council – including a $44
million special dividend - the net proceeds will be $110.2 million. Pricing at the top end of the range will increase
the sum the council receives.
The council is selling down its stake to free up capital for its other activities and to enable the port to raise funds
for its ongoing expansion, the first element of which is a $173-to-$190 million Wharf 6 development the company hopes to
start work on later this year.
That work is needed to reduce congestion behind the port’s breakwater, which is restricting cruise ship arrivals and
caused about 200 secondary vessel movements at the port in the past year. When the new wharf is completed mid-2022, the
company is expecting secondary vessel movements to fall to fewer than 20 a year.
“The IPO is essential to funding this investment programme,” chief executive Todd Dawson said. “Napier Port is embarking
on the next phase of its history and we welcome new investors in the port that share our aspirations.”
The indicative pricing implies a market valuation of $454-to-$520 million and an enterprise value of $431.6-to-$497.6
million. Post-IPO, the company will be debt-free and have $20 million of cash on its books for its development capital
expenditure. It has arranged a $180 million debt facility to fund its plans.
The company is forecasting earnings before interest, tax, depreciation and amortisation of $39.7 million in the year
ending Sept. 30, rising to $40.9 million the following year. It reported ebitda of $37.2 million last year.
Revenue is forecast to increase to $97.4 million and $102.5 million respectively from $91.7 million.
The indicative offer price gives a 2020 per-share price-earnings ratio of 22.7 to 26 times.
Final pricing is expected to be confirmed on Aug. 7 with listing expected on Aug. 20.
The port has offered locals, staff and iwi the chance to pre-register for a preferential allocation.
Dawson said the level of local interest appears good, but it's too early to say how much stock may be taken up within
the region. He declined to give a figure on registrations to date.
He said the company is also keen to see iwi participating in the offer. There are a lot of parallels between the port’s
interest and those of iwi.
“They are generally long-term thinkers and see the benefit of holding strategic assets,” he told journalists at a
briefing at the port today.
The port is picking a modest rise in replacement capex to about $13.2 million in the 2020 year, from $9 million this
year and $5.2 million last year.
Development capex will jump to almost $59 million in 2020, with the Wharf 6 work underway, from $18 million this year
and $7.5 million last year. The 2019 and 2020 years also include about $11 million for a new tug.
The company’s dividend policy is to pay out 70-to-90 percent of free cash flow – being net profit after adjusting for
non-cash items and allowing for average replacement capex.
It plans to pay a 2.5 cent, or $5 million, dividend, in December. and a 7 cent a share dividend for the 2020 financial
year – about $14.9 million - with a gross dividend yield of 4-to-4.6 percent.
Port of Napier, the country’s fourth-largest container operation and the sixth-largest for bulk cargo, is enjoying
strong growth from Hawke’s Bay’s expanding pip fruit, log, wood pulp and timber production.
About two-thirds of its revenue comes from container-related services.
The firm’s forecasts assume only modest increases in volumes. Container revenues are assumed to rise to $59.5 million
this year and $63.1 million in 2020, from $58 million last year.
Bulk cargo revenue is expected to rise to $31.6 million this year and $32.1 million next year, from $29 million last
Cruise revenue is projected to increase to $3.6 million this year and $4.8 million in the 2020 financial year, from $2.6
million last year. The port handled 70 liners last year and is expecting 83 in the coming season and 87 the following
Most of the port’s cargo travels less than 100 kilometres by land and Dawson said the company is strategically placed to
benefit from the ongoing growth of the region’s $8.1 billion economy.
The port is also on the main shipping route down the country’s east coast and is starting to benefit as importers look
to relocate some operations to Napier to avoid import congestion at major ports to better distribute goods into the
Dawson said that is a long-term goal but the port, currently dominated by exports, has plenty of capacity to absorb
greater volumes of imports to improve the overall efficiency of its operations.
About 79 percent of its container traffic last year was for export.