CORRECT: Napier Port priced at top of the range; locals nab 20%
(Fixes level of priority entitlements, adds detail in 2nd paragraph)
By Paul McBeth
Aug. 8 (BusinessDesk) - Napier Port shares will sell at $2.60 - the top of the indicated range - after a bookbuild was significantly oversubscribed and investors at the front of the queue picked up a fifth of the stock on offer.
Hawke's Bay Regional Council will receive $234 million for the 90 million shares, or 45 percent of the port operator it is selling. Of the 7,591 staff, iwi and locals who applied for their guaranteed allocation almost 90 percent received it in full, with only those who sought more than $10,000 of stock subject to scaling. The priority allocations amounted to 20 percent of the shares on offer.
The offer price gives a 2020 per-share price-earnings ratio of 26 times. That compares to a forward PE of 40.6 times for both Port of Tauranga and South Port New Zealand, according to Refinitiv data. Napier Port's indicative price range was $2.27-$2.60.
"Napier Port is pleased with the results of the bookbuild which was significantly over-subscribed with strong support from Hawke’s Bay, New Zealand and international investors," chair Alasdair MacLeod said in a statement.
"This positions Napier Port well for its planned debut on the NZX later this month and for the long term."
The bookbuild was held during turbulent trading conditions, with the S&P/NZX 50 joining a global rout at the start of the week on concerns about the heightened trade tensions between the US and China. The market recovered those losses yesterday when the Reserve Bank cut the official cash rate more steeply than analysts had anticipated, stoking demand for stocks offering reliable dividends such as infrastructure companies.
Napier Port's dividend policy is to pay out 70-to-90 percent of free cash flow – being net profit after adjusting for non-cash items and allowing for average replacement capital spending.
It plans to pay a 2.5 cent, or $5 million, dividend, in December and a 7 cent a share dividend for the 2020 financial year – about $14.9 million - with an implied gross dividend yield of 4 percent.
Of the funds raised, $110.2 million will be used to clear existing, so it can then fund its future capital spending plans, which include building a new multi-purpose wharf. About $107.9 million will go to council, and the rest - $15.9 million - will fund limited recourse loans to certain port employees to buy shares and to meet the costs of the initial public offering, which was managed by investment banks Deutsche Craigs and Goldman Sachs.
The port operator will start trading on the NZX on Aug. 20, falling in the middle of the latest company earnings season and on a day when Comvita and Mercury NZ are scheduled to report.
Demand for the offer meant there will be significant scaling across all investor groups, the company said.
Of the priority investor groups, 97 percent of port staff took up the offer and four of the eligible iwi groups participated.
The IPO is the second this year after pre-revenue medicinal cannabis research firm Cannasouth went public in June. It had been more than two years since the local market attracted any new equity listings, although cheap finance meant the debt market was an attractive alternative for firms to raise money.
Napier Port is forecasting earnings before interest, tax, depreciation and amortisation of $39.7 million in the year ending Sept. 30, rising to $40.9 million the following year. It reported ebitda of $37.2 million last year.
Revenue is forecast to increase to $97.4 million and $102.5 million respectively from $91.7 million.