Little port is biggest winner in value report

And the winner is ... the minnow.

Institutional sharebroker ABN Amro has lifted its valuation of Lyttelton Port and upgraded the stock to "buy" after researching Solid Energy's 13-year deal to move coal through the port.

Lyttelton is a minnow among listed port companies, with a market capitalisation of $181 million compared with the $750 million of Ports of Auckland and Port of Tauranga.

ABN Amro has lifted its per share valuation of the company from $1.66 to $1.98. The shares closed yesterday at $1.77.

The broker says Lyttelton is better value for investors than the two bigger listed port companies.

The upgrade from a hold came after analysis of last year's deal between rail company Toll and Solid Energy to transport coal to the port.

Solid Energy will freight 2.4 million tonnes of coal to the port this year, increasing to 3.8 million tonnes from 2007/08.

ABN Amro said the company had the highest gross yield of four listed port companies - 9.4 per cent - and the lowest price-to-earnings ratio.

The two bigger listed ports could be affected this year by a review of the hundreds of millions of dollars New Zealand's biggest exporter, Fonterra, spends on ocean freight.

Construction on a new hub for the dairy company's dry goods exports from the Waikato begins this year.

Ports of Auckland is competing with the Port of Tauranga for the business.

ABN Amro's report says this raises the spectre of a price war.

The broker said it was taking "an increasingly conservative approach" to the ports because of that possibility.