Shares in Port of Tauranga are trading well above analyst valuations. Photo / George Novak
Port of Tauranga's share price continues to defy analyst views trading at a level well above their valuations.
Forsyth Barr analysts Andy Bowley and Scott Anderson raised their target price on the stock to $6.20 this week but retained their underperform rating based on its current share price which is trading over $7.70.
The analysts forecast net profits to fall to $94 million in financial year 2020 - down from $100.6m with a bounce back to $102.2m in FY2021.
They point to lower log exports as Statistics New Zealand data suggests the port's log exports fell 22 per cent in its FY2020 based on lower prices, the closure of Chinese ports in February and the pause on forestry caused by the alert level 4 lockdown.
"The outlook for log exports is mixed given lower prices but an impending wall of wood."
Container volumes were expected to be flat for the first nine months of its FY2020 compared to the prior year, with the last quarter softening further reflecting a decline in non-essential exports.
The analysts said Port of Tauranga was currently trading at a price-to-earnings multiple of 51 times despite 20 per cent of its earnings being linked to joint ventures that were not core port business.
"While we believe POT deserves a valuation premium [to the market] we question how big the premium should be, particularly in an environment when trade cargo trends are subdued."
Fund managers are reporting strong fee income gains in the latest reporting period but it remains to be seen how they fared since Covid-19 rocked financial markets.
Milford Funds filed its accounts this week, with the Companies Office showing management fee income soared 30 per cent to $73.5m in the year to March 2020, following a 20 per cent gain the previous year.
Milford, which manages more than $9 billion through a range of KiwiSaver and private funds, also collected $21.16m in performance fees, the accounts showed.
The fund manager reported an after-tax net profit of $6.9m, up from the $5.37m the previous year. No dividend was declared, compared to $10m paid out in 2019.
Rival Fisher Funds' management fee income climbed 14 per cent to $85.2m, although performance fee income fell by 32 per cent to $17.6m.
Total fee income was up slightly at $108m, from $105.6m the previous year.
Fisher Funds wasn't able to convert the revenue gains into profit, with higher costs dragging the net profit down to $42.2m from $48m in 2019.
Fisher Funds declared a dividend of $41.2m to its shareholders - TSB Group and Hong Kong private equity firm TA Associates.
Meanwhile, boutique fund manager Devon Funds Management boosted its fee income by 15 per cent to $12.7m in the year to March and recorded a net profit of $6.4m.
The firm paid dividends of $6.1m to parent company Investment Services Group.
NZ buy-now pay-later company Laybuy seems to have found favour with investors as it prepares for its initial public offer on the ASX.
Laybuy, which was set up in New Zealand by Gary Rohloff and his son Alex in 2016, was said to be shopping around a management presentation this week ahead of a bookbuild which closed on Wednesday.
The company is looking to raise around A$80m (NZ$85.7m) through its IPO, with a listing set down for September.
The bookbuild was open to New Zealand investors. One major fund manager spoken to by Continuous Disclosure said it was just too small an offer for it to even look at.
But he said the success of rival company Afterpay should provide a strong platform for investor interest in the deal.
Another NZ investment manager, Castle Point co-founder Jamie Young, who was an early investor in the technology for the sector, said investors and fund managers in Australia had become comfortable with the sector after the rise of Afterpay.
Last year, Canadian buy-now pay-later business Sezzle chose to list on the ASX despite its operations being largely in Canada and the US.
"I presume Laybuy is following the same playbook."
Young said Australia and New Zealand had very developed buy-now pay-later markets whereas it was only just taking off in the UK and the US.
The rise in online sales, driven by Covid-19 lockdowns, is also making the business more attractive to retailers who can use it to drive sales.
Laybuy's business in New Zealand is said to be slightly larger than its UK business but it has only been in the UK for a year and its growth there is much faster and likely to outstrip the NZ business soon.
Young said looking at it on a three to five-year basis the opportunity set was large, with the UK and the US markets only having three major players and the retail market being much larger.
"It's becoming the default thing retailers have to have."
It's just a shame the company has chosen the ASX over the NZX.
Shareholders in the Australian-listed banks got some good news this week with Australian regulator Apra loosening its guidance around capital distributions.
In April, the regulator issued the recommendation that banks should "seriously consider deferring decisions on the appropriate level of dividends until the outlook is clearer".
That saw Westpac and ANZ both defer decisions on their interim payouts.
But the regulator has now changed its view to "maintain caution" and has asked the banks to retain at least half of their earnings when making decisions on pay-outs.
Apra chair Wayne Byres said banks did not need to continue to defer capital distributions, provided they "moderate payments to sustainable levels based on robust stress testing, and continue to prioritise supporting their customers and the economy."
It also postponed a move to increase capital buffers until 2021 giving banks more time to rebuild their capital levels in the wake of Covid-19.
It's estimated up to half of the shareholders in the big four listed banks - Commonwealth Bank of Australia (ASB's parent), Westpac, ANZ, and National Australia Bank (BNZ's parent) are retail mum and dad investors. The banks' stocks are also widely held by superannuation funds including KiwiSaver providers.
In a note on the sector, Jarden said the Apra announcement removed the uncertainty which had been weighing on the valuations and share price performance of the banks of late.
"We believe this update from Apra is positive for the sector. Australian Banks now being able to pay dividends and continuing to trade below book value makes them attractive in this low-rate environment offering yields of circa 4 per cent or greater on a franked basis."
Conversely, the European banking regulator has just frozen European bank dividends until January.
Shares in the big four ASX-listed banks all immediately jumped around 2 per cent on the news.
Jarden's research partner Credit Suisse now has outperform ratings on Westpac, ANZ and NAB with a neutral rating on CBA which is due to release its full-year financial results next month.
Fletcher Building, Spark and Ryman are potentially all on the radar.