New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

Equity Bottom-Up

<ul><li>We remain positive on AFT Pharmaceuticals (AFT) after its FY24 result. (1) Revenue momentum continues to be a standout feature with +20% growth in FY24 versus FY23 ex licensing, and importantly +70% ex ANZ, and (2) after a soggy 1H24, gross margins in 2H24 rebounded ahead of our expectations. FY25 EBIT ex licensing guidance is for ~+45% growth at the midpoint — our lowered forecast (we think cost growth will remain elevated to support the strong revenue growth) is at the top-end of guidance.</li><li>Investors will require patience given the dents to market confidence over multiple years, but all in all, the growth story remains intact and the result reaffirmed the growth runway.</li><li>AFT trades on ~19x FY25 PE and ~12x EV/EBIT, and we expect NPAT to nearly double between FY25 and FY27. </li></ul>

We remain positive on AFT Pharmaceuticals (AFT) after its FY24 result. (1) Revenue momentum continues to be a standout feature with +20% growth in FY24 versus FY23 ex licensing, and importantly +70% ex ANZ, and (2) after a soggy 1H24, gross margins in 2H24 rebounded ahead of our expectations. FY25 EBIT ex licensing guidance is for ~+45% growth at the midpoint — our lowered forecast (we think cost growth will remain elevated to support the strong revenue growth) is at the top-end of guidance.Investors will require patience given the dents to market confidence over multiple years, but all in all, the growth story remains intact and the result reaffirmed the growth runway.AFT trades on ~19x FY25 PE and ~12x EV/EBIT, and we expect NPAT to nearly double between FY25 and FY27. 

AFT Pharmaceuticals - FY24 Result — Roaring Revenue

<ul><li>AFT Pharmaceuticals (AFT) downgraded its FY24 underlying EBIT (ex. licensing income) guidance by -25%.</li><li>While it stated this was due to weaker-than-expected Australasian sales, relative to our expectations it was gross margins remaining soft.</li><li>This margin weakness has continued from 1H24 and is due to product mix and higher costs. </li></ul>

AFT Pharmaceuticals (AFT) downgraded its FY24 underlying EBIT (ex. licensing income) guidance by -25%.While it stated this was due to weaker-than-expected Australasian sales, relative to our expectations it was gross margins remaining soft.This margin weakness has continued from 1H24 and is due to product mix and higher costs. 

<ul><li>On balance we viewed AFT Pharmaceuticals (AFT's) 1H24 result positively.</li><li>The key positive was underlying non-ANZ sales growth of +95% versus 1H23, which, coupled with ongoing solid ANZ performance, more than offset gross margin weakness.</li><li>The key question for investors is the degree of operating leverage AFT can generate from its continued strong revenue growth trajectory.</li></ul>

On balance we viewed AFT Pharmaceuticals (AFT's) 1H24 result positively.The key positive was underlying non-ANZ sales growth of +95% versus 1H23, which, coupled with ongoing solid ANZ performance, more than offset gross margin weakness.The key question for investors is the degree of operating leverage AFT can generate from its continued strong revenue growth trajectory.

AFT Pharmaceuticals -  1H24 Result — Not Without Some Pain

<ul><li>AFT Pharmaceuticals (AFT) has finally received the long awaited US FDA approval for its Maxigesic IV product (hospital-based product, being the intravenous formulation of Maxigesic for postoperative use).</li><li>The approval provides access to the world's largest IV analgesic market (2018 volumes of ~250m vials and revenue of ~US$750m).</li><li>We don't expect Maxigesic IV to be an overnight success but believe it is a compelling alternative to the current standard of care. </li></ul>

AFT Pharmaceuticals (AFT) has finally received the long awaited US FDA approval for its Maxigesic IV product (hospital-based product, being the intravenous formulation of Maxigesic for postoperative use).The approval provides access to the world's largest IV analgesic market (2018 volumes of ~250m vials and revenue of ~US$750m).We don't expect Maxigesic IV to be an overnight success but believe it is a compelling alternative to the current standard of care. 

<ul><li>(1) ANZ revenue (AFT's core defensive growth driver) grew +24% versus FY22, (2) underlying ROW revenue grew +71% versus FY22, and (3) 2H23 underlying gross margins were AFT's strongest ever.</li><li>First-time FY24 underlying EBIT guidance was slightly below our expectations, however, (1) we have a higher degree of confidence in execution on this guidance range relative to previous years, and (2) at the mid-point still represents +22% growth versus FY23.</li><li>AFT trades on ~18x 12 month forward PE and ~13x EV/EBIT, and is one of the few defensive, structural growth stories in the NZ market where valuation is undemanding.</li></ul>

(1) ANZ revenue (AFT's core defensive growth driver) grew +24% versus FY22, (2) underlying ROW revenue grew +71% versus FY22, and (3) 2H23 underlying gross margins were AFT's strongest ever.First-time FY24 underlying EBIT guidance was slightly below our expectations, however, (1) we have a higher degree of confidence in execution on this guidance range relative to previous years, and (2) at the mid-point still represents +22% growth versus FY23.AFT trades on ~18x 12 month forward PE and ~13x EV/EBIT, and is one of the few defensive, structural growth stories in the NZ market where valuation is undemanding.

AFT Pharmaceuticals: FY23 Result — On Script

New Zealand

AFT Pharmaceuticals Limited develops, licenses, and sells pharmaceutical products. The Company offers medicines for allergy, cough, cold, and flu, eye care, pain management, and laxatives. AFT Pharmaceuticals serves customers worldwide.

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AFT Pharmaceuticals (AFT NZ)

AFT Pharmaceuticals - FY24 Result — Roaring Revenue

We retain our OUTPERFORM rating with an unchanged target price of NZ$4.60 (roll forward and peers re-rate offsets earnings downgrades).

Forsyth Barr

AFT Pharmaceuticals - A Bumpy Road

While it stated this was due to weaker-than-expected Australasian sales, relative to our expectations it was gross margins remaining soft.

Forsyth Barr

AFT Pharmaceuticals - 1H24 Result — Not Without Some Pain

The key positive was underlying non-ANZ sales growth of +95% versus 1H23, which, coupled with ongoing solid ANZ performance, more than offset gross...

Forsyth Barr

AFT Pharmaceuticals - FDA Pain Is Over

AFT Pharmaceuticals (AFT) has finally received the long awaited US FDA approval for its Maxigesic IV product (hospital-based product)

Forsyth Barr

AFT Pharmaceuticals: FY23 Result — On Script

We liked what we saw in AFT Pharmaceuticals' (AFT) FY23 result: (1) ANZ revenue (AFT's core defensive growth driver) grew +24% versus FY22, (2)...

Forsyth Barr

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