Tauranga’s port looking strong

Analysts expect full-year earnings tomorrow to be at top end of $88m-$92m guidance

Port of Tauranga’s half-year result tomorrow is expected to show New Zealand’s largest port is on track to deliver full-year earnings at the top end of its guidance of $88 million to $92m.

Analysts said continued strong momentum in container and log volumes since the company’s buoyant first quarter activity report meant the market was looking for a number at the upper end of the guidance.

“If the margins are starting to im- prove in the business that could be the upside surprise,” said Craigs Investment Partners senior research analyst Mohandeep Singh.

Craigs is forecasting the port company will make another full-year special dividend of 5c per share on top of a usual dividend in line with its capital management programme.

The company, which reported an NZ port record of handling more than one million containers in 2017, last year completed a $350m expansion.

This included dredging to widen and deepen its harbour entrance to accommodate larger ships, enabling some of the world’s biggest container ships to call at NZ for the first time.

The project also ensured it could be the big ships’ only stop in New Zealand for some years.

Singh said the deepening project gave the Port of Tauranga a “first mover advantage”.

Other New Zealand ports were possibly five to 10 years behind the resource consent starting line.

This advantage could be reflected in the port’s share price (yesterday closing at $5.01), which analysts covering the stock concluded was expensive, Singh said.

The market would be looking for the port company to contain costs this financial year after the recent capital expenditure. “Their costs were bumped a bit so efficiency came down. They’re looking to reduce costs by 10 per cent over the next two years in terms of port running costs.”

In a market note last month FNZC research analyst Paul Turnbull said FNZC’s revised forecast for 2018 net profit after tax of $93.3m now sat above the top of the guidance range.