Port of Tauranga chief executive Mark Cairns says Forsyth Barr's recent decision to retain an "underperform" rating on the port's shares failed to reflect the company's successful execution of its hub strategy.
Forysth Barr analyst Andy Bowley said in his late July report that Port of Tauranga (POT) had enjoyed close to a doubling of its share price over the past four years, despite it generating no real earnings growth.
"We expect the company's four-year earnings downgrade cycle to continue near term as the outlook for FY17E appears less positive than implied at the time of the Kotahi deals in 2014.
"The hub port strategy will create value longer term, in our opinion, but potential upside is being partially mitigated by the competitive response from the broader industry.
"We retain an underperform rating, not least given POT's elevated valuation."
Forsyth Barr's analysis states that the 10-year Kotahi-POT deal suggested that POT would benefit from South Island transhipments once bigger ships arrived in early FY17E, but that this no longer appeared to be the case.
It also states that recent data from the Ministry of Transport on container throughput, and from Statistics NZ on logs and other cargo, confirmed POT would experience another year of flat earnings.
Mr Cairns said it was a pity some of Forsyth Barr's clients might have missed out on a doubling of their investment over the period.
"You can't run a $2.6 billion business from behind a computer spreadsheet."
In particular, Mr Cairns challenged the suggestion that the South Island transhipment strategy had failed to live up to expectations.
He also questioned the characterisation of the competitive response, saying that POT was gaining significant container share (see story at right).
Noting that he was restricted in what he could disclose because POT would be releasing its full-year 2016 earnings later this month, Mr Cairns said the analyst had missed the key point that the hubbing strategy had been very successful in the North Island.
It was to be expected that earnings would be flat, given the $350 million capital expenditure (capex) programme and the drop in log exports, he said.
"We've got 95 per cent of the North Island dairy exports aggregated over Tauranga. The analyst is negative that South Island transhipments are slower than he thought. But they are not slower than we expected."
Mr Cairns said he was very comfortable with how the port's strategy execution was going.
"We've finished our capex programme, and we've completed our dredging programme.
We were expecting a 6500 TEU [6m equivalent container] vessel - which the industry has been saying couldn't come because it couldn't get around the top of Australia.
We've now had Maersk Lines confirming that we will have a 9500 TEU vessel in October.
That business will build. And I'm confident we're going to get to our vision of greater transhipment in the South Island."
* Port of Tauranga will report its full year 2016 result on August 18.