POT: Is it Worth Getting Back In?

  

Port of Tauranga is an interesting share. Interesting because I once owned it about 10 years ago and extremely interesting considering I would have made HEAPS on my initial investment of around 8000 shares - roughly 5x considering I sold at around 5 bucks - that 5x figure doesn't even include dividends.

Never mind. You live, you learn.

What I want to know is, is it worth getting back in?

As we speak its trading at $4.25 - not cheap considering other more deserving companies but it is cheap if you look out 3-5 years from now.

Its the largest container terminal in NZ and is well on the way to becoming the biggest terminal in the country, grabbing more and more tonnage off Ports of Auckland.

The terminal at their MetroPort Auckland, a rail-linked inland port in South Auckland will continue to grow at the expense of Auckland Ports as POT is more efficient and they don't have the horrible wee Trade Unions to deal with.

If you could get this share now, get it, if you see a weak spot coming up you could do well to get this under 4 bucks.



POT @ Share Investor

Share Price Alert: Port of Tauranga Ltd 3
POT: Is it Worth Getting Back In?
Port of Auckland Dispute:Time to Move On
Share Price Alert: Port of Tauranga Ltd 2 
Share Price Alert: Port of Tauranga Ltd
Long Term View: Port Of Tauranga Ltd
Port in a storm
Ports of Auckland put a shot over competitor's bow

Discuss POT @ Share Investor Forum

c Shareinvestor 2017

Port of Auckland Dispute: Time to move on

Nevile Sidney Lodge, Evening Post 1976.

Whatever side you are on over the Ports of Auckland (POA) employment dispute, what would be agreed by most is that the impasse must be ended and it must be ended quickly.

The striking union workers have cost the port millions in lost revenue, cost it its reputation as an easy and reliable place to do business, cost Auckland City in terms of business from related industry and cost New Zealand in terms of its competitiveness and with other markets.

What is at stake now though from this ongoing dispute is the future of the port and they way it will do business in years to come.

The port is a highly inefficient one and makes a poor return on capital invested compared to its peers, especially Port of Tauranga Ltd [POT.NZX] which is a least 20% more efficient in terms of container movements.

The unionised workforce at POA has been thus far unable to get efficiencies that ports like POT have because the union is grounded in past employment practices that date back decades and are no longer relevant in this fast-paced competitive global market we all now compete in.

The Maritime Union and its head, Gary Parsloe, were unwilling - or unable - to come to the party and let go of perks. In one glaring example that would have them being paid for work they didn't do and as a consequence the union workforce at the POA site are in jeopardy of losing heir jobs to workers who are now in the process of being employed on an individual contracting out basis. Their rates of pay are also pretty spectacular for semi-skilled work.

It would have been much better for the union and its members to agree that they must become more efficient of course but that looks unlikely to happen now that their strikes and stoppages have brought the company to its knees and the issue to a head.

We must look at Port of Tauranga for a solution.

Unlike POA, POT has a totally different structure in terms of its workforce, management and organisation as a business.

POT has a non-unionised workforce that is open and flexible in its outlook towards how its employer runs its business and they are fully aware of their need to be competitive in a global environment. As such its efficiency is far higher and its ability to gain business at the expense of competition like POA is clearly obvious.

This doesn't mean that POT workers are short changed though. A large number of the ports workers own shares in the company so are incentivised in that respect to work with the company, rather than just as employees. One cannot underestimate the value of ownership and if POA workers had this incentive available to them you can bet they would be keen work rather than keen to work their employer.

If we compare the financial performance of the two, as Brian Gaynor has in a Herald piece on Saturday we can see a yawning chasm between the two:

"As the accompanying figures show, POA has been hammered by POT in recent years: POA's ebitda has fallen from $92.6 million in 2003 to $74.4 million, whereas POT's has increased from $69.5 million to $95.0 million; POA's ebitda margin has fallen from 55.3 per cent to 40.5 per cent while POT's has increased from 47.6 per cent to 51.2 per cent; most importantly, POA's dividend has declined from $34.5 million to $17.6 million while POT's has increased from $22.8 million to $40.2 million.

This is a huge concern to Auckland ratepayers as the $17.8 million POA dividend represents a return of only 2.1 per cent on POA's $848 million 2005 takeover value.

The biggest difference between the two companies is in terms of costs as they both have fairly similar total revenue, but POA has had total June 2011 year costs of $109.4 million compared with POT's $90.3 million.
This is where the argument about internal employees and outsourcing comes in, the issue at the heart of the current industrial dispute.

In 2010, POA had total employee expenses of $51.9 million compared with only $18.5 million at POT and last year employee benefits plus pension costs were $54.9 million at POA compared with POT's $25.3 million".

Emmerson, NZ Herald, Jan 2012

Never underestimate how much negative pressure politicians have put on the likes of POA as well, one in particular has had a big impact on the port.

Mike Lee, former head of the Auckland Regional Authority (ARC) and now semi-retired on Waiheke Island but still muddling through local politics, lobbied to buy back the partially listed POA in 2005 and put a $858 million value on it and as of today the company is returning just over 2% based on that sale value. Clearly that is not acceptable and something needs to change.

Mr Lee also milked  hundreds of millions of dividends from the port to pay for mostly transport related spending and left the POA balance sheet seriously laden with debt which is still a millstone around its neck today.

In 2006 -7 when POT started discussing merging with POA, Mike Lee and his ARC put the kibosh on the merger because not only was it an ATM for spending for the council, Mike has a philosophical and political view that this kind of asset should be publicly owned and dirty private enterprise should keep their mitts off it, never mind that the merger would have brought economies of scale to the port, economic stimulation for Auckland and Tauranga and jobs for union and non-union workers alike. Shame about politics huh? Especially the left.

To this point, selling down a minority stake of say 49% share in POA and re-listing it on the NZX  (as will be done with New Zealand's state electricity monopolies) will help make politicians more honest and businesslike in what they do rather than political and move the port ahead competitively. A hybrid ownership structure is the best model to achieve this with a ratepayer/taxpayer owed business entity and has been done quite successfully with Air New Zealand Ltd [AIR.NZX] Auckland International Airport Ltd [AIA.NZX] and of course POT itself which has been a stunning success under hybrid ownership.

The Productivity Commission came out with a report last week not only critical of unions and their role in the ports demise but also recommended a part sale of New Zealand ports to help logistics and competition in this area move into the 21st century rather than stuck in the time warp of the 1951 port strike that was only resolved when the military moved in.

I have some sympathy with critics - including some a few comments in the Productivity Commission's report mentioned above - who say management share blame over this employment dispute, and I would have to agree, but only in terms of the length of time this dispute has drawn on - 11 months and counting. Management should have taken a tougher stance with the inflexible union and its head months ago and so they can, in this respect only, be held partly responsible for losing valuable customers like Fonterra and shipping line Maersk.

Because of the delays in resolving this bitter dispute, jobs have and will be lost directly within the port and in related industry and reputations tarnished.

It is important that this situation be resolved as quickly as possible for all the reasons outlined above and more. In a way, perhaps the stubborn, implacable union stance has been positive in a way as it has brought the dispute to a head. The port will be able to restructure in a way that will protect its long-term future. For the Port of Auckland to remain status quo in terms of its employment and business structure will mean that eventually it will become irrelevant and the Port of Tauranga will be the first port of call for importers and exporters.

Unions must keep this in mind, this is not 1951 when we had full employment, guaranteed markets and  a very rosy economic outlook. The 1951 Strike had 22,000 (compared to just few thousand today) wharfies striking for a 15% pay rise when they were offered a very generous 9% and the militant union held New Zealand to ransom for almost 6 months.

In 2012 there is no place for similar militancy and intransigence on the part of the Maritime Union. Like 1951 it is and was a turning point for unions in this country. It was the first major blow to its power in 1951 and in subsequent years unions have negotiated their way to less than 10% of employees who remain in a union.

As in 2012 the majority of the public were opposed to the 1951 strike. On public support alone we need to sort this dispute out and do it quickly but of course you cannot ignore the economic opportunities that will arise if striking workers are just a little bit more flexible in their attitudes to their employer and ultimately NZ Inc.

This is no time for self protection and grandstanding by Gary Parsloe and the Maritime Union, the country and its economic future are at stake.


POT @ Share Investor

Share Price Alert: Port of Tauranga Ltd 2
Share Price Alert: Port of Tauranga Ltd
Long Term View: Port Of Tauranga Ltd
Port in a storm
Ports of Auckland put a shot over competitor's bow

Discuss POT @ Share Investor Forum
Download POT Company Reports

c Share Investor 2012

Share Price Alert: Port of Tauranga Ltd 2

Port of Tauranga Ltd [POT.NZX] shares have continued their spectacular run from the last Share Investor Share Price Alert. Since that post on May 9 when POT shares finished trading at $8.70 on May 6 the share price has increased by $1.26 or 14.5% in an overall market that has been flatish.

This is after a record 2011 full year profit result and good future prospects based on increased exports and the port being favoured over its biggest rival, Ports of Auckland, by big shipping lines.

This latest share price rise comes off a base September 2010 share price of $6.75 where POT shares have piled on almost two bucks or nearly 30% to finish trading at the above mentioned $8.70. 2011 alone has seen its share price rise by just over 2 dollars, the bulk of that rise being in the last 5 months.

The market has been over exuberant in my opinion and while the company is a quality one and its long term future looks bright its share price is overvalued and is due for a pull-back.

Its fundamentals are looking thin and there are quality stocks on the NZX that have lower multiples than POT and are currently a better buy.

P/E	22.860
EPS	$0.436
NTA	$5.090
Gross Div Yield	4.303%

Wait for the pull-back it you have been looking to buy POT and consider selling soon if you were going to anyway.



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POT @ Share Investor

Share Price Alert: Port of Tauranga Ltd
Long Term View: Port Of Tauranga Ltd
Port in a storm
Ports of Auckland put a shot over competitor's bow

Discuss POT @ Share Investor Forum
Download POT Company Reports



c Share Investor 2011

Share Price Alert: Port of Tauranga Ltd

Ports of Tauranga Ltd [POT.NZX] have had a truely spectacular run share price wise in 2011.

From a September 2010 share price of $6.75 POT shares have piled on almost two bucks or nearly 30% to finish trading at $8.70 on Friday 6 May. 2011 alone has seen its share price rise by just over 1 dollar, the bulk of that rise being in the last 6-7 weeks alone.

This has come as a result of a good performance for the 2011 half year result, up a stunning 23% on the 2009 result.

This is a result of massively increased cargo volumes through the port, especially imports. These volumes seem mostly be related to increases in the imports and exports from the farming sector and look set to continue if record commodity prices hold and especially if the US dollar strengthens.

You would have to say that the market has factored in reasonably well where the company is going in the medium term so the company may well be fairly priced given that everything seems to be going well for the company at present.

Having said that, ports are highly cyclical businesses and if you are looking for a price pullback and have wanted this great company for your portfolio you might want to be patient and wait for an inevitable weakness in cargo volumes.

Timing here is everything.


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POT @ Share Investor

Long Term View: Port Of Tauranga Ltd
Port in a storm
Ports of Auckland put a shot over competitor's bow

Discuss POT @ Share Investor Forum




c Share Investor 2011

Long Term View: New Zealand Refining Ltd

In this series of posts I am going to be looking at stocks listed on the NZX in relation to their returns to shareholders over the life of their listing -what shareholders would now see in their back pockets if they had invested in the company IPO. The calculation of returns includes dividends and tax credits.

New Zealand Refining Ltd [NZR.NZ] has been the best performing stock listed on the NZX in terms of returns to shareholders since its listing in Sept 1961 (we will start at an adjusted 25c per share from available 1989 data to make our comparison) $9.71c in net dividends (excluding the period 1961-1997. No data can be easily found for dividends) and 30% more in tax credits (see chart above) a 10:1 share split in 2005 and a 6:1 split in November 2009 gives NZR a slightly more than 7800% return (see chart below for the share price percentage gain against the average of all NZX indexes - does not include dividends, tax credits and the share split in its calculation) over the nearly 21 year listing of NZR (the period between 1961 and 1989 is excluded because no shareprice or dividend details are available so the return will be higher than stated here), an approximate annual net return just over 371.%.

This is approximately a 2000% better return when compared to the average of all NZX indexes.





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NZR @ Share Investor

Chart of the Week: New Zealand Refining Ltd
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c Share Investor 2010