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Napier Port shares surge to 1/3 above August listing price on strong cargo volumes

Thursday 24th October 2019

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Napier Port shares hit a record after the Hawke's Bay operator said its cargo and container volumes beat forecasts. 

The stock rose as high as $3.50 and was recently at up 1.5 percent at $3.45. The shares were listed in August in a partial privatisation by the Hawke's Bay Regional Council, selling at $2.60 a share in an initial public offering. That's a 32.7 percent gain over a period when the S&P/NZX All Index has been relatively flat. 

The port operator said total container volumes were up 1.9 percent at 271,000 TEUs (20-foot equivalent units) with export volumes buoyed by a record apple season and increased meat exports. Bulk cargo rose 10.8 percent to 3.4 million tonnes as log volumes from Gisborne picked up in the fourth quarter. 

The company had forecast annual container volumes of 269,000 TEUs and bulk cargo of 3.38 million tonnes. Cruise ship visits to the port rose 22.8 percent to 70, meeting forecast.

Greg Smith, head of research at Fat Prophets, said it was a reasonably steady update for the company, which was pitched as a yield stock offering steady dividends when it went public. 

"The stock could be a beneficiary of funds flowing out of gen-tailers (electricity generator-retailers) on risks associated with Tiwai Point, with a fairly strong outlook for reliable cash flows," he said. 

The country's electricity suppliers had been trading at or near record highs as the hunt for yield in a low interest rate environment pushed investors to take on equity risk in property and utilties stocks.

That paused yesterday when the power companies were sold aggressively after Tiwai Point smelter owner New Zealand Aluminium Smelters said the site was under review, with closure an option, thanks to slumping aluminium prices and sustained high wholesale electricity prices. 

S&P Global Ratings analysts Alexander Dunn and Meet Vora said in a note that full closure of the smelter would result in "lower electricity prices in the South Island over the short term and could take at least two to three years for the market to normalise, subject to the completion of additional transmission infrastructure."

While that would affect all of the gen-tailers, the S&P Global analysts said Genesis Energy and Contact Energy would be the hardest hit because of their exposure to thermal generation. 



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