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Forsyth Barr

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Napier Port Third Quarter Volumes; Logs up, Containers down</h2>
Napier Port’s (NPH) third quarter volume update highlights continued momentum in log exports broadly offset by container industry congestion challenges. In light of the COVID-19 lockdown impact on the prior year quarter 3Q21 should be compared to 3Q19 as a barometer of underlying business activity. On this basis log volumes are up +21%, but container volumes are down -11% and total vessel calls down -6%.
Global container industry congestion is having a major impact on capacity in the seafreight industry as evidenced by the -29% fall in container vessel visits to NPH in 3Q21 vs 3Q19. Fewer vessel calls has resulted in a significant increase in the average number of container exchanges per each visit, up +24% to 1,379 in 3Q21.
Strengthening log export prices are motivating forestry owners to harvest. Export volumes of 0.816mT in 3Q21 equate to our peak harvest volumes (~3mT pa) on a seasonally adjusted basis. Should log volumes be maintained at current levels through 4Q21 we see small upside risk to our FY21 earnings forecasts.
Trading at ~17x one year forward EV/EBITDA and ~34x one year forward PE we continue to view NPH as expensive. UNDERPERFORM.
Figure: NPH 3Q21 cargo volumes
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 112.8pt;">
&nbsp;
</td>
<td style="width: 40.8pt;">
3Q21
</td>
<td style="width: 38.8pt;">
3Q20
</td>
<td style="width: 44.8pt;">
3Q19
</td>
<td style="width: 44.8pt;">
Chg (vs 20)
</td>
<td style="width: 48.8pt;">
Chg (vs 19)
</td>
</tr>
<tr>
<td style="width: 112.8pt;">
Containers (TEU’000)
</td>
<td style="width: 40.8pt;"></td>
<td style="width: 38.8pt;"></td>
<td style="width: 44.8pt;"></td>
<td style="width: 44.8pt;"></td>
<td style="width: 48.8pt;"></td>
</tr>
<tr>
<td style="width: 112.8pt;">
Exports
</td>
<td style="width: 40.8pt;"></td>
<td style="width: 38.8pt;"></td>
<td style="width: 44.8pt;"></td>
<td style="width: 44.8pt;"></td>
<td style="width: 48.8pt;"></td>
</tr>
<tr>
<td style="width: 112.8pt;">
Wood pulp &amp; timber
</td>
<td style="width: 40.8pt;">
11
</td>
<td style="width: 38.8pt;">
9
</td>
<td style="width: 44.8pt;">
14
</td>
<td style="width: 44.8pt;">
22%
</td>
<td style="width: 48.8pt;">
-21%
</td>
</tr>
<tr>
<td style="width: 112.8pt;">
Canned food/other F&amp;B
</td>
<td style="width: 40.8pt;">
2
</td>
<td style="width: 38.8pt;">
2
</td>
<td style="width: 44.8pt;">
3
</td>
<td style="width: 44.8pt;">
0%
</td>
<td style="width: 48.8pt;">
-33%
</td>
</tr>
<tr>
<td style="width: 112.8pt;">
Other dry
</td>
<td style="width: 40.8pt;">
2
</td>
<td style="width: 38.8pt;">
3
</td>
<td style="width: 44.8pt;">
4
</td>
<td style="width: 44.8pt;">
-33%
</td>
<td style="width: 48.8pt;">
-50%
</td>
</tr>
<tr>
<td style="width: 112.8pt;">
Apples &amp; pears
</td>
<td style="width: 40.8pt;">
14
</td>
<td style="width: 38.8pt;">
16
</td>
<td style="width: 44.8pt;">
17
</td>
<td style="width: 44.8pt;">
-13%
</td>
<td style="width: 48.8pt;">
-18%
</td>
</tr>
<tr>
<td style="width: 112.8pt;">
Meat
</td>
<td style="width: 40.8pt;">
4
</td>
<td style="width: 38.8pt;">
4
</td>
<td style="width: 44.8pt;">
4
</td>
<td style="width: 44.8pt;">
0%
</td>
<td style="width: 48.8pt;">
0%
</td>
</tr>
<tr>
<td style="width: 112.8pt;">
Fresh &amp; other chilled produce
</td>
<td style="width: 40.8pt;">
4
</td>
<td style="width: 38.8pt;">
4
</td>
<td style="width: 44.8pt;">
4
</td>
<td style="width: 44.8pt;">
0%
</td>
<td style="width: 48.8pt;">
0%
</td>
</tr>
<tr>
<td style="width: 112.8pt;">
Empty
</td>
<td style="width: 40.8pt;">
1
</td>
<td style="width: 38.8pt;">
1
</td>
<td style="width: 44.8pt;">
1
</td>
<td style="width: 44.8pt;">
0%
</td>
<td style="width: 48.8pt;">
0%
</td>
</tr>
<tr>
<td style="width: 112.8pt;">
Total exports
</td>
<td style="width: 40.8pt;">
39
</td>
<td style="width: 38.8pt;">
39
</td>
<td style="width: 44.8pt;">
46
</td>
<td style="width: 44.8pt;">
0%
</td>
<td style="width: 48.8pt;">
-15%
</td>
</tr>
<tr>
<td style="width: 112.8pt;">
Imports
</td>
<td style="width: 40.8pt;"></td>
<td style="width: 38.8pt;"></td>
<td style="width: 44.8pt;"></td>
<td style="width: 44.8pt;"></td>
<td style="width: 48.8pt;"></td>
</tr>
<tr>
<td style="width: 112.8pt;">
Dry
</td>
<td style="width: 40.8pt;">
7
</td>
<td style="width: 38.8pt;">
7
</td>
<td style="width: 44.8pt;">
7
</td>
<td style="width: 44.8pt;">
0%
</td>
<td style="width: 48.8pt;">
0%
</td>
</tr>
<tr>
<td style="width: 112.8pt;">
Reefer
</td>
<td style="width: 40.8pt;">
1
</td>
<td style="width: 38.8pt;">
1
</td>
<td style="width: 44.8pt;">
1
</td>
<td style="width: 44.8pt;">
0%
</td>
<td style="width: 48.8pt;">
0%
</td>
</tr>
<tr>
<td style="width: 112.8pt;">
Empty
</td>
<td style="width: 40.8pt;">
30
</td>
<td style="width: 38.8pt;">
26
</td>
<td style="width: 44.8pt;">
35
</td>
<td style="width: 44.8pt;">
15%
</td>
<td style="width: 48.8pt;">
-14%
</td>
</tr>
<tr>
<td style="width: 112.8pt;">
Total imports
</td>
<td style="width: 40.8pt;">
38
</td>
<td style="width: 38.8pt;">
34
</td>
<td style="width: 44.8pt;">
43
</td>
<td style="width: 44.8pt;">
12%
</td>
<td style="width: 48.8pt;">
-12%
</td>
</tr>
<tr>
<td style="width: 112.8pt;">
Other containers
</td>
<td style="width: 40.8pt;">
3
</td>
<td style="width: 38.8pt;">
2
</td>
<td style="width: 44.8pt;">
2
</td>
<td style="width: 44.8pt;">
50%
</td>
<td style="width: 48.8pt;">
50%
</td>
</tr>
<tr>
<td style="width: 112.8pt;">
Total containers
</td>
<td style="width: 40.8pt;">
80
</td>
<td style="width: 38.8pt;">
74
</td>
<td style="width: 44.8pt;">
90
</td>
<td style="width: 44.8pt;">
8%
</td>
<td style="width: 48.8pt;">
-11%
</td>
</tr>
<tr>
<td style="width: 112.8pt;"></td>
<td style="width: 40.8pt;"></td>
<td style="width: 38.8pt;"></td>
<td style="width: 44.8pt;"></td>
<td style="width: 44.8pt;"></td>
<td style="width: 48.8pt;"></td>
</tr>
<tr>
<td style="width: 112.8pt;">
Bulk (kT)
</td>
<td style="width: 40.8pt;"></td>
<td style="width: 38.8pt;"></td>
<td style="width: 44.8pt;"></td>
<td style="width: 44.8pt;"></td>
<td style="width: 48.8pt;"></td>
</tr>
<tr>
<td style="width: 112.8pt;">
Logs
</td>
<td style="width: 40.8pt;">
816
</td>
<td style="width: 38.8pt;">
465
</td>
<td style="width: 44.8pt;">
677
</td>
<td style="width: 44.8pt;">
75%
</td>
<td style="width: 48.8pt;">
21%
</td>
</tr>
<tr>
<td style="width: 112.8pt;">
Other exports
</td>
<td style="width: 40.8pt;">
45
</td>
<td style="width: 38.8pt;">
33
</td>
<td style="width: 44.8pt;">
38
</td>
<td style="width: 44.8pt;">
36%
</td>
<td style="width: 48.8pt;">
18%
</td>
</tr>
<tr>
<td style="width: 112.8pt;">
Imports
</td>
<td style="width: 40.8pt;">
155
</td>
<td style="width: 38.8pt;">
131
</td>
<td style="width: 44.8pt;">
114
</td>
<td style="width: 44.8pt;">
18%
</td>
<td style="width: 48.8pt;">
36%
</td>
</tr>
<tr>
<td style="width: 112.8pt;">
Total bulk
</td>
<td style="width: 40.8pt;">
1,016
</td>
<td style="width: 38.8pt;">
629
</td>
<td style="width: 44.8pt;">
829
</td>
<td style="width: 44.8pt;">
62%
</td>
<td style="width: 48.8pt;">
23%
</td>
</tr>
</tbody>
</table>
Source: NPH, Forsyth Barr analysis
Andy Bowley&nbsp; Head of Research
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.1&amp;permmsgid=msg-f:1704773733793851962&amp;th=17a892adb932ea3a&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ9QURqyqjRZXcTR0dX0h-xH94TqtdmymM-82pK5eL2oizBot_jjCmro7lIN3hTqyeYyR-4MYWvH-glBvLG3CRTrNMagM1wT-ZZ6tfuP_0bMEA8zKjxzSjDbA1M&amp;disp=emb" class="editor-image img-responsive"></figure>
 M:&nbsp;<a href="tel:+6421338941" target="_blank" data-stringify-link="tel:+6421338941" data-sk="tooltip_parent" rel="noopener">+64 21 338 941</a>&nbsp;|P:&nbsp;<a href="tel:+6444958246" target="_blank" data-stringify-link="tel:+6444958246" data-sk="tooltip_parent" rel="noopener">+64 4 495 8246</a>&nbsp;| TF: 0800 367 227&nbsp; Level 22, NTT Tower, 157 Lambton Quay, Wellington

Napier Port Third Quarter Volumes; Logs up, Containers down
Napier Port’s (NPH) third quarter volume update highlights continued momentum in log exports broadly offset by container industry congestion challenges. In light of the COVID-19 lockdown impact on the prior year quarter 3Q21 should be compared to 3Q19 as a barometer of underlying business activity. On this basis log volumes are up +21%, but container volumes are down -11% and total vessel calls down -6%.
Global container industry congestion is having a major impact on capacity in the seafreight industry as evidenced by the -29% fall in container vessel visits to NPH in 3Q21 vs 3Q19. Fewer vessel calls has resulted in a significant increase in the average number of container exchanges per each visit, up +24% to 1,379 in 3Q21.
Strengthening log export prices are motivating forestry owners to harvest. Export volumes of 0.816mT in 3Q21 equate to our peak harvest volumes (~3mT pa) on a seasonally adjusted basis. Should log volumes be maintained at current levels through 4Q21 we see small upside risk to our FY21 earnings forecasts.
Trading at ~17x one year forward EV/EBITDA and ~34x one year forward PE we continue to view NPH as expensive. UNDERPERFORM.
Figure: NPH 3Q21 cargo volumes




&nbsp;


3Q21


3Q20


3Q19


Chg (vs 20)


Chg (vs 19)




Containers (TEU’000)









Exports









Wood pulp &amp; timber


11


9


14


22%


-21%




Canned food/other F&amp;B


2


2


3


0%


-33%




Other dry


2


3


4


-33%


-50%




Apples &amp; pears


14


16


17


-13%


-18%




Meat


4


4


4


0%


0%




Fresh &amp; other chilled produce


4


4


4


0%


0%




Empty


1


1


1


0%


0%




Total exports


39


39


46


0%


-15%




Imports









Dry


7


7


7


0%


0%




Reefer


1


1


1


0%


0%




Empty


30


26


35


15%


-14%




Total imports


38


34


43


12%


-12%




Other containers


3


2


2


50%


50%




Total containers


80


74


90


8%


-11%












Bulk (kT)









Logs


816


465


677


75%


21%




Other exports


45


33


38


36%


18%




Imports


155


131


114


18%


36%




Total bulk


1,016


629


829


62%


23%




Source: NPH, Forsyth Barr analysis
Andy Bowley&nbsp; Head of Research

 M:&nbsp;+64 21 338 941&nbsp;|P:&nbsp;+64 4 495 8246&nbsp;| TF: 0800 367 227&nbsp; Level 22, NTT Tower, 157 Lambton Quay, Wellington

Napier Port: Third Quarter Volumes; Logs Up, Containers Down