Pictured: an aerial view of Napier Port; Photo: by Napier Port.
Napier Port, located in Hawke’s Bay on the North Island of New Zealand, has begun trading on the New Zealand Stock Exchange (NZH) at an offer price of N$2.60 (US$1.66), raising NZ$234 million (US$149.94 million). The port has listed under the ticker code “NPH.”
Of the funds raised, $110.2 million will be used to repay debt and will be used to fund the building of a multi-purpose wharf. The new wharf is needed to handle bigger ships that are increasingly calling in Oceania and to provide 24/7 berthing capability.
The new wharf will be designed to handle box ships up to 320 meters (1,050 feet) in length and cruise ships up to 360 meters in length.
A further NZ$107.9 million of the funds raised will be used by the main owner of the port, Hawke’s Bay Regional Council, to realize its investment. The rest of the cash will be used for a variety of purposes including paying the costs of the initial public offering (IPO).
Chairman Alasdair MacLeod rang the bell to start trading on the NZH and he commented that the initial public offer would enable investment in port infrastructure.
“Today is the culmination of a five-year journey that has seen the Port, Hawke’s Bay Regional Council and the broader community working in close partnership towards a shared goal,” MacLeod said.
“Thanks to the IPO, Napier Port can continue to invest in improving capacity. That includes the development of the multi-purpose 6 Wharf on the north side of the existing container terminal which will allow the Port to support regional growth for the long-term.”
Napier CEO Todd Dawson commented that “our new wharf will become a vital part of the networked infrastructure we manage; easing congestion, allowing us to host the larger container and cruise ships that are already visiting; extending our container capacity; and giving us new options to manage diverse cargoes.”
The owner of the port, Hawke’s Bay Regional Council, offered 90 million shares, accounting for about 45 percent of the equity. About 20 percent of the shares offered were initially offered on a priority entitlement to port employees, residents, non-resident ratepayers and “iwi” (members of the local Maori tribes). About 90 percent of the 7,591 applicants to the priority entitlement received their application in full. Of the eligible port employees, 97 percent participated in the priority offer.
About 80 percent of the equity was therefore available for the general public to buy.
On the first day of trading, the shares opened at NZ$2.90, which was 11.5 percent above the offer price, and ended the day at NZ$2.95 a share. About 16.1 million of the shares were traded in the first day, which was about 17.9 percent of the free-float, according to Sumeet Singh, Head of Research IPOs and Placements at Aequitas Research, which publishes via the Smartkarma platform.
“Based on the estimates provided by the company, the shares are now trading at 14.3x fiscal year 2019 and 13.9x fiscal year 2020 EV/EBITDA. In comparison, Tauranga trades at 27.1x fiscal year 2019,” Singh wrote in a research note.
“Tauranga” refers to the Port of Tauranga (NZX: POT), a container and multipurpose port on the northern coast of the North Island of New Zealand.
“As mentioned in my previous notes, Tauranga is much larger, has better margins and lower exposure to exports. Hence, it should trade at a substantial premium to NPH. Moreover, NPH has one of the largest exposures to forestry products and exports, which might expose it to external headwinds. A 40 percent discount to Tauranga would imply a fiscal year 2019 EV/EBITDA of 16.2x or share price of around NZ$3.30/share. A 50 percent discount would imply a fiscal year 2019 EV/EBITDA of 13.5x or share price of around NZ$2.80/share. In my view, a 40 percent discount appears appropriate given that NPH has some elevated risks over the longer term from the forestry cycle,” Singh wrote.
For more details on the IPO, please read FreightWaves’ earlier article, “PORT REPORT: US$157 million Port of Napier IPO fails to excite”.