New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

Equity Bottom-Up

<ul><li>Port of Tauranga (POT) has reported a strong 1H23 result with underlying NPAT of NZ$63m, up +11%, marginally above our expectations.</li><li>With modest volume headwinds (total trade -2.5% against the prior year), the result was driven by pricing gains</li><li>Management has lifted its full year NPAT guidance range from NZ$115m-NZ$120m to NZ$117m-NZ$124m (FB: NZ$122m).</li></ul>

Port of Tauranga (POT) has reported a strong 1H23 result with underlying NPAT of NZ$63m, up +11%, marginally above our expectations.With modest volume headwinds (total trade -2.5% against the prior year), the result was driven by pricing gainsManagement has lifted its full year NPAT guidance range from NZ$115m-NZ$120m to NZ$117m-NZ$124m (FB: NZ$122m).

Port of Tauranga (POT): 1H23 Result Initial Thoughts

Thematic (Sector/Industry)

<ul><li>Abnormal gains in international freight are unwinding rapidly, particularly for seafreight, with global spot indices now down ~80% from their peaks but still above pre-pandemic levels</li><li>Air cargo's rates compression has been slower, mirroring the slow recovery in air seat capacity</li><li>In this normalising, yet far from normal environment, Freightways (FRE; OUTPERFORM) and Mainfreight (MFT; OUTPERFORM) remain our preferred exposures in the sector</li></ul>

Abnormal gains in international freight are unwinding rapidly, particularly for seafreight, with global spot indices now down ~80% from their peaks but still above pre-pandemic levelsAir cargo's rates compression has been slower, mirroring the slow recovery in air seat capacityIn this normalising, yet far from normal environment, Freightways (FRE; OUTPERFORM) and Mainfreight (MFT; OUTPERFORM) remain our preferred exposures in the sector

Transport Trends: Nothing Normal About the Normalising

<ul><li>Weaker first quarter volumes: Trade volumes are back to 1Q21 levels, with a higher container weighting given softness across several key bulk cargos</li><li>Earnings guidance: The mid-point of POT's new FY23 NPAT guidance implies ~+5% growth year on year</li><li>Pricing more than offsetting cost inflation</li></ul>

Weaker first quarter volumes: Trade volumes are back to 1Q21 levels, with a higher container weighting given softness across several key bulk cargosEarnings guidance: The mid-point of POT's new FY23 NPAT guidance implies ~+5% growth year on yearPricing more than offsetting cost inflation

Port of Tauranga: Profit Growth Congested by Lower Volumes

<ul><li>Freightways (FRE): We are attracted to FRE due to (1) the strength of new customer, (2) further pricing for effort opportunities, and (3) the disciplined expansion into the Australian express freight market</li><li>Mainfreight (MFT): MFT is a high quality business with a proven track record for growth</li><li>Port of Tauranga (POT): POT offers attractive defensive characteristics in the current environment</li></ul>

Freightways (FRE): We are attracted to FRE due to (1) the strength of new customer, (2) further pricing for effort opportunities, and (3) the disciplined expansion into the Australian express freight marketMainfreight (MFT): MFT is a high quality business with a proven track record for growthPort of Tauranga (POT): POT offers attractive defensive characteristics in the current environment

<ul><li>Pricing benefits flowing: We estimate average realised unit container revenue grew ~+14% in FY22, more than mitigating cost inflation</li><li>Modest volume growth: Total trade tonnage was flat during FY22 with a modest mix benefit</li><li>Higher capex over next few years: Capex is due to rise in FY23 after several subdued years</li></ul>

Pricing benefits flowing: We estimate average realised unit container revenue grew ~+14% in FY22, more than mitigating cost inflationModest volume growth: Total trade tonnage was flat during FY22 with a modest mix benefitHigher capex over next few years: Capex is due to rise in FY23 after several subdued years

Port of Tauranga: FY22 — Earnings Cruising, Valuation Anchored

New Zealand

Port of Tauranga Limited activities include the provision of wharf facilities, back up land for the storage and transit of import and export cargo, berthage, cranes, tug and pilotage services for exporters, importers and shipping companies and the leasing of land and buildings.  The Group also operates a container terminal and has bulk cargo marshalling operations.

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Port of Tauranga (POT NZ)

Port of Tauranga (POT): 1H23 Result Initial Thoughts

Port of Tauranga (POT) has reported a strong 1H23 result with underlying NPAT of NZ$63m, up +11%, marginally above our expectations; With modest...

Forsyth Barr

Transport Trends: Nothing Normal About the Normalising

The industry is normalising, but from different angles and at a different rates: Abnormal gains in international freight are unwinding rapidly,...

Forsyth Barr

Port of Tauranga: Profit Growth Congested by Lower Volumes

Port of Tauranga (POT) has started FY23 slowly with trade volumes down -7% during its first quarter, though notably cycles a strong 1Q22; First...

Forsyth Barr

Transport Trends: Mixed Bag

The post-pandemic world is a mixed bag for the transport sector: aviation is enjoying an expected and much needed resurgence; global airfreight...

Forsyth Barr

Port of Tauranga: FY22 — Earnings Cruising, Valuation Anchored

Port of Tauranga, having re-rated over recent months to ~36x one year forward PE and ~23x EV/EBITDA, is now trading on fair to full earnings...

Forsyth Barr

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