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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 expansion later.
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 Rooney said.
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 Rooney said.
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 DTL respectively.
Tauranga had captured increased value in the Kotahi deal, the Timaru deal with Kotahi and the return of Maersk's Southern Star service.
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 said.