Morningstar | Port of Tauranga's Strong Competitive Position Does not Justify its Lofty Valuation.
Port of Tauranga is the most productive and efficient port in Australasia. Trade volumes have increased dramatically, aided by logs and containers. Container volumes have been particularly impressive, as the company continues to gain market share. Log and forestry volumes have been on an uptrend as a result of increased demand from Asia, but we see risks to this trend from a potential weakening of China's housing market. Nonetheless, we estimate that trade volumes will double in 12 years, given that shipping lines are increasingly favouring the company over its rivals because of its significant cost advantages. We believe the company will comfortably earn returns in excess of its cost of capital through the cycle, leaving us confident in our wide economic moat rating.Port of Tauranga and its subsdiaries operate in four segments: Port Operations, which provides and manages port services, and cargo handling facilities through the Port of Tauranga, MetroPort and the Timaru Container Terminal; Property Services, which consists of managing and maintaining Co.'s property assets; Marshalling Services, which consists of the contracted terminal operations, stevedoring, marshalling and scaling activities of Co.'s subsidiary, Quality Marshalling (Mount Maunganui) Limited; as well as Transport Services, which consists of the road transport and freight handling activities, of Co.'s subsidiaries, Tapper Transport Limited, Tapper SIP Limited and MetroPack Limited.
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