Daily ShareChat: Port of Tauranga

Monday 21st June 2010

Port of Tauranga is well placed to grow its container and bulk businesses using its very strong balance sheet and its sizeable landbank, says Morningstar analyst Nachiket Moghe.

"However, a high New Zealand dollar and an uncertain global economic outlook might impact volumes in the near to medium term," Moghe says.

Earlier this month, the port raised its guidance for normalised net profit for the year ending this month from $45.2 million to between $49 million and $50 million.

"The guidance suggests a better-than-expected second-half performance well ahead of our forecast of $47.4 million," he says.

"Revenue growth seems to have been stronger in the second-half, underpinned by volume growth, particularly over the last quarter. Palm kernels, fertilizers and forestry were the standouts."

Moghe has raised his 2010 forecast to $49.5 million and his 2011 forecast to $52 million.

"Port of Tauranga is seeing good cashflows as capital expenditure requirements are minimal. We think this will prompt management to increase dividends by approximately 10% or in line with profit growth this year," he says.

That implies the second-half dividend will be 14% higher than last year at 20.5 cents a share.
Moghe says although the stock is fundamentally strong, its current market price is about fair value.

Recommendation: Hold

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