Port of Tauranga received a double rating upgrade from brokers Forsyth Barr. Photo / NZME
The contrasting fortunes of two of New Zealand's major ports could not have been more clear this week.
While Napier Port materially downgraded its earnings guidance, Port of Tauranga received a double rating upgrade from brokers Forsyth Barr.
On Monday, Napier told the market that supply chain disruption and labour shortages would drag its operating profit down by about 23 per cent to $16.4 million in the first half-year to March.
That resulted in Forsyth Barr analysts Andy Bowley and Matt Noland downgrading the stock's target price from $3.10 to $2.85, although they remain neutral on the company.
"Napier Port Holdings' apparent volume and earnings volatility stem from its cargo concentration with heavy exposure to forestry and pip-fruit exports," the analysts said.
"While container shipping service changes may have influenced some of the volume decline, we expect a large proportion was temporary/one-off and will return in future periods."
They noted that Napier Port was trading at a material discount to Port of Tauranga but said this was justified in light of Tauranga's superior outlook for growth and return on capital.
Conversely, the analysts moved Port of Tauranga from an "underperform" rating to "outperform", lifting its target price from $5.90 to $6.75 based on expectations that the company will pursue a "more active pricing strategy".
"While its increasing scale and the finite log export market may partially slow this momentum, we expect management to pursue a more active pricing strategy than previously."
The analysts said Port of Tauranga was trading close to its lowest premium to domestic peers over the past 10 years.
"It's by no means cheap ... yet few 'real assets' currently are. With an above average earnings growth outlook supported by a more active pricing strategy, capacity enhancements and its supply chain investments, we are comfortable paying more for a quality, real asset."
Shares in Napier Port are down 17 per cent this year and closed at $2.90 on Tuesday, while Port of Tauranga shares are down around 13 per cent this year and closed on $6.41 on Tuesday.
Chapman Tripp partner Roger Wallis is predicting another strong year ahead for equity capital raisings.
Last year about $2.7 billion was raised via the NZX, and with Air New Zealand's $1.2b raise underway, the market is already off to a strong start.
"I don't know if there will be 20 deals this year but I would have thought there would be 12 or 15 and Air NZ has already got off to pretty good start," said Wallis.
While most equity raisings in 2020 were linked to Covid, with a number of companies undertaking emergency capital raisings, 2021 had been much less linked to the pandemic, Wallis said.
"Last year wasn't normal but probably three-quarters of the deals had nothing to do with Covid."
He said there would still be some companies repairing their balance sheets this year but others would be raising money to grow and follow the Government's mantra of building back better.
The most common form of equity raising has been a share placement, followed by a share purchase plan.
In the past, placements have been largely the realm of institutional investors but Wallis said he had been surprised by the number of retail investors now able to get in via this path.
"We have seen a heap of issues where the front end is a placement but by 10am in the morning I have an email from Sharesies saying we are participating in the placement with their retail clients - that is something you can't do in Australia.
"So there is a very high participation of retail in these transactions. In the front end of them." He said that was the result of a law change that came through in 2014.
"What we have found is increasingly retail investors are participating in the placements so there is a real enhanced participation through NZ legislation."
Companies often followed this up with a share purchase plan, where investors could put in up to $50,000 each.
Wallis also predicted more direct listings, which were a feature of last year's market.
"That trend will only continue - there will still be IPOs [initial public offers] with some big ones potentially this year, but just below the radar will continue to be direct listing applications as well."
He said direct listings could be a smarter way to raise capital in the future as they didn't require a company tying itself up for months in the IPO process.
"If you don't immediately need the capital, you list and then raise capital once you have results out using a cleansing notice. It's much more cost-effective and less distracting for management."
Transtasman private equity firm Mercury Capital has ended up with a near 100 per cent stake in New Zealand's largest primary healthcare group following a sale process that kicked off last year.
Mercury, which is headed by former Goldman Sachs NZ chief Clark Perkins, had owned just under 50 per cent of Auckland-based Tāmaki Health, with the founding Patel family owning the other half share.
In May 2021 they hired UBS to pitch the business to Australian health providers and private equity buyers with expectations of selling it for about $400 million.
Media reports last year suggested Crescent Capital, Pacific Equity Partners and BGH Capital all looked at the business, but it now looks as though Mercury has decided to double down on its investment – buying out the Patel stake.
Companies Office records show the ownership changes happened two weeks ago.
Mercury now holds 98.88 per cent of Tāmaki Health shares with the remainder owned by directors including former Health Minister Tony Ryall.
The deal comes hard on the heels of the sale of Hamilton Radiology and MRI Midland – two Waikato specialist healthcare providers – to Australia's I-MED.
Tāmaki Health was founded more than 40 years ago by Dr Kantilal Patel and wife Ranjna Patel and attracted Mercury Capital as a major shareholder in 2017.
The business has more than 40 clinics and its doctors perform more than a million consultations a year. Tāmaki is understood to generate annual earnings before interest, taxation, depreciation and amortisation of $35 million.
Passive fund manager Kernel has entered the KiwiSaver fray with the launch of a low-fee, high-growth index-tracking fund.
Members will be able to pick its curated high-growth fund or take a do-it-yourself approach with a customised mix of funds.
The Kernel funds will be fully invested in equities, making them higher risk than more diversified funds - and potentially more rewarding.
Annual management fees for the Kernel fund start at 0.25 per cent, undercutting investment platform Investnow, whose KiwiSaver funds start at 0.31 per cent for its NZ shares index fund.
NZX-owned SuperLife also plays in this space, with its cheapest offering priced at 0.84 per cent for its US500 fund, according to Sorted's Smart Investor comparison tool.
Kernel founder and CEO Dean Anderson formerly worked for the NZX, specialising in data products, licensing and contracts, before setting up Kernel in 2019.
The KiwiSaver market now has more than 26 providers and another is said to be mulling entry.
Share trading platform Sharesies has also been linked to KiwiSaver launch plans, although it has declined to comment.
Any offering it comes up could also be an index-tracker, with exchange-traded funds already proving highly popular with users of its platform.
Former ANZ executive Fred Ohlsson is to head new investment manager Amplifi Group.
Amplifi was set up by in May last year and is 53 per cent owned by Mint Group - the investment management company set up by Rebecca Thomas.
A further 30 per cent is owned by Ascentro Capital Partners - an Auckland headquartered private equity and boutique investment company which is majority owned by a bunch of Tauranga-based investors. The rest is owned by current or former staff linked to Mint.
Ohlsson left the ANZ in 2019 after nearly two decades with the bank and has since been doing consultancy work.
Mint Asset Management, which now falls under Amplifi, was founded 16 years ago and has $1.7b in funds under management. Its counts the New Zealand Superannuation fund as one of its clients.
Private equity is seen as a likely buyer for Fonterra's consumer business.