Daily ShareChat: Port of Tauranga

Port of Tauranga is a great long-term story but the valuation suggested by the current share price "is a little stretched," says First NZ Capital analyst Rob Bode.

The ports sizable land bank "leaves it well-positioned to capture growth in both its container and breakbulk business," Bode says.

However, in the near term, the investment case is not compelling," he says. "That said, we think a degree of over-valuation may be sustained as Port of Tauranga is actively looking to win back container market share and the prospects for gaining further share of the dairy trade are hard to refute."

The key issues in coming months are whether the recent surge in log volumes (up 27% in the year ended June) can be sustained and whether the port can regain its share of the container trade, including Fonterra's volume through Port Taranaki.

"If Chinese log demand stays at current levels, log volumes could lift to around four million tonnes in 2010 which would deliver a reasonable acceleration in earnings," Bode says.

He is forecasting reported net profit will grow from $45.2 million this year to $46.3 million next year and $49.6 million in 2011. He values the shares at $6.37.

BROKER CALL:  First NZ Capital rate Port of Tauranga (NZX: POT ) as underperform.

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