Port of Tauranga is laying foundations for future growth.
A month on from Port of Tauranga announcing its strategic
deal with Kotahi - which is Fonterra and Silver Fern Farms -
and shipping giant Maersk, analysts have upgraded its stock.
Quite how Port of Tauranga's medium to long-term foray into
the South Island plays out is unclear but short-term
container growth appears to be laying the foundation for
Port of Tauranga's 50% purchase of Timaru's PrimePort, and
now expectations of quadrupling container numbers from Timaru
have prompted broker Forsyth Barr and Craigs Investment
Partners to upgrade price targets or their recommendations.
Both brokers are lauding Tauranga's strategic move, and its
potential gains when larger vessels carrying up to 6500
containers reach New Zealand's shores.
Port Otago's strength lies in its logical positioning to
export from Otago and Southland's hinterlands but it will
have to compete anew for the less than 10,000 TEUs (twenty
foot equivalent containers), which it has recently been
railing from Timaru to Port Chalmers.
Forsyth Barr broker Andrew Rooney said the Kotahi deal had
added $1.70 in value to Tauranga's price, raising the overall
target price from $13.70 to $16.20, and upgrading the stock
from ''underperform'' to ''neutral''.
''The pathway for bigger ships following the Kotahi-Maersk
deals provides long-term volume certainty and therefore the
business case to undertake [shipping channel] dredging,'' Mr
Kotahi is estimated to account for 30% to 40% of New Zealand
export volumes in 250,00 TEUs.
Kotahi has committed to doubling its TEUs through Tauranga
over the next decade to 1.8 million boxes, and 2.5 million
TEUs to Maersk over the same period.
''The coming together of the largest port, the largest
shipper and the largest shipping line provides a step-change
solution for the the New Zealand export supply chain,'' Mr
Craigs broker Peter McIntyre said Timaru was
''well-positioned'' for growth from South Island dairy trade
in general and Fonterra, through Kotahi, and was ''clearly a
key potential customer''.
''These two commitments from Kotahi sit at the heart of the
opportunity for Maersk and Port of Tauranga to work together
to bring big ships, of 6500 TEU [capacity] into New Zealand
for the first time,''he said.
While Timaru handled 22,000 containers last year, it was
rebuilding towards its previous high of 80,000 with the
Kotahi deal, and Mr McIntyre said Tauranga had estimated
Timaru could have a maximum capacity of 100,000 annual TEUs.
''One of Maersk's existing services will make a new call into
Timaru to pick up these volumes,'' he said.
He noted New Zealand had 13 commercial ports, of which nine
were vying for container trade.
Craigs' 12-month target price on Port of Tauranga had risen
from $14.09 to $14.62, and it retained a ''hold'
recommendation on the stock.
''While the industry is competitive by its nature, we view
the risks as manageable and Port of Tauranga's strategic
positioning as strengthened, following the Kotahi
development,'' he said.
Mr Rooney said there was potentially a deeper relationship
between Port of Tauranga and Kotahi.
He said there was potential for a merger between Fonterra's
export and domestic logistics businesses; being Kotahi and
Tauranga had captured increased value in the Kotahi deal, the
Timaru deal with Kotahi and the return of Maersk's Southern
Mr McIntyre said he expected Port of Tauranga to focus on
other cargo owners, as well as other shipping lines.
He expected the Kotahi commitment to support Tauranga's
efforts for a major import call to Tauranga.
The positives for Tauranga were cargo growth and stronger
terms of trade, while the risks was competitive pressure,
volatile log prices, loss of staff and a weaker economy, he