Port of Tauranga, New Zealand's largest export port, may increase its dividend payout ratio and make additional capital payments to investors as cash flows return to normal levels after a period of higher spending, according to brokerage Craigs Investment Partners.
The port company will probably spend an average $48 million a year over 2012-16 to complete its current expansion and dredging plans, Arie Dekker, an analyst at Craigs said in a research note. Beyond 2016, the company will probably revert to its average pattern of around $20 million of capital expenditure a year, Dekker said.
"Net debt is expected to increase over this initial period but to come down at the end of the dredging programme - at which point we forecast an increase in payout ratio to 90 per cent from 80 per cent over 2013-17," Dekker said in the note. "We are forecasting for 9 per cent growth in dividends over the medium-to-longer-term supported by solid growth in underlying performance and Port of Tauranga's strong balance sheet - with this being at a 90 per cent payout ratio, potential for capital repayments are also possible."
Port of Tauranga posted a record annual profit in 2013 as it readies for a dredging project to prepare for larger ships. The port is pushing for supremacy in the port sector with dredging expected to start next year, and after investing in its MetroPort facilities in Auckland and taking a 50 per cent stake in PrimePort Timaru.
Shares in Port of Tauranga were unchanged at $13.90, having gained 5.6 per cent this year.
Craigs has a 'hold' recommendation on the shares, with a spot valuation of $13.38 and a 12-month price target of $14.22.