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>Aeronautical returns: AIA will continue to generate aeronautical returns in excess of its 'true market' WACC applied by the marginal investor, despite the Commerce Commission's (ComCom) potential move to lower the target returns available for airports.</li><li>RAB multiple highlights the incentive to invest: Returns in excess of cost of capital create value in most valuation frameworks</li><li>Aeronautical currently represents less than a third of group value: We expect AIA's aeronautical business to represent ~56% of group EBITDA in FY28 (once the step-up in PSE5 pricing is absorbed in earnings), but only ~33% of pre-tax earnings, given its increasing depreciation and interest burden</li></ul>

Aeronautical returns: AIA will continue to generate aeronautical returns in excess of its 'true market' WACC applied by the marginal investor, despite the Commerce Commission's (ComCom) potential move to lower the target returns available for airports.RAB multiple highlights the incentive to invest: Returns in excess of cost of capital create value in most valuation frameworksAeronautical currently represents less than a third of group value: We expect AIA's aeronautical business to represent ~56% of group EBITDA in FY28 (once the step-up in PSE5 pricing is absorbed in earnings), but only ~33% of pre-tax earnings, given its increasing depreciation and interest burden

Auckland Airport: Still Incentivised to Invest

Thematic (Sector/Industry)

<ul><li>Mega trends have been dictating transport sector performance over the last few years.</li><li>The pandemic saw international travel halt overnight, congested supply chains, and ripples sent across the broader freight sector.</li><li>Just as these trends began to normalise, global economic conditions started to deteriorate, leading to supply chain destocking, and weaker passenger and freight end demand. </li></ul>

Mega trends have been dictating transport sector performance over the last few years.The pandemic saw international travel halt overnight, congested supply chains, and ripples sent across the broader freight sector.Just as these trends began to normalise, global economic conditions started to deteriorate, leading to supply chain destocking, and weaker passenger and freight end demand. 

<ul><li>For the first time in three years we are moving our WACC assumptions down.</li><li>This is driven by a modestly lower (-25 bps) interpolated 10-year interest rate assumption; our proxy for the risk free rate.</li><li>We also incorporate our C&amp;ESG ratings into our WACC assumptions. We do this on an overall neutral basis, with a scale of -25 bps to +25 bps added to the cost of equity. </li></ul>

For the first time in three years we are moving our WACC assumptions down.This is driven by a modestly lower (-25 bps) interpolated 10-year interest rate assumption; our proxy for the risk free rate.We also incorporate our C&amp;ESG ratings into our WACC assumptions. We do this on an overall neutral basis, with a scale of -25 bps to +25 bps added to the cost of equity. 

Equity Strategy - WACC Review; a Lower Rfr and Adding C&ESG

<ul><li>A deteriorating economic backdrop is impacting demand for freight and passengers.</li><li>Imports into New Zealand have slumped over 2023 as supply chain destocking has compounded slowing domestic consumption.</li><li>The latter has softened demand across different transport modes. </li></ul>

A deteriorating economic backdrop is impacting demand for freight and passengers.Imports into New Zealand have slumped over 2023 as supply chain destocking has compounded slowing domestic consumption.The latter has softened demand across different transport modes. 

Transport Trends - Where's the Freight, Mate?

<ul><li>RAB multiples (enterprise value divided by regulatory asset base) provide a useful means of valuing and sense checking valuations for regulated companies.</li><li>The issue of RAB multiples has been brought up by numerous submitters in the current Commerce Commission (ComCom) Input Methodologies (IM) review process.</li><li>Some submitters have referenced Forsyth Barr reports, at times extensively (CEG in particular). </li></ul>

RAB multiples (enterprise value divided by regulatory asset base) provide a useful means of valuing and sense checking valuations for regulated companies.The issue of RAB multiples has been brought up by numerous submitters in the current Commerce Commission (ComCom) Input Methodologies (IM) review process.Some submitters have referenced Forsyth Barr reports, at times extensively (CEG in particular). 

Regulated Companies - The Relevance of RAB Multiples

New Zealand

Auckland International Airport Limited owns and operates the Auckland International Airport.  The Airport includes a single runway, an international terminal and two domestic terminals.  The Airport also has commercial facilities which includes airfreight operations, car rental services, commercial banking center and office buildings.

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Auckland Intl Airport (AIA NZ)

Auckland Airport: Still Incentivised to Invest

The value of Auckland Airport's (AIA) aeronautical business is materially higher than its regulatory asset base (RAB); The magnitude of AIA's RAB...

Forsyth Barr

Transport Trends - A Second Wave

Mega trends have been dictating transport sector performance over the last few years. The pandemic saw international travel halt overnight,...

Forsyth Barr

Equity Strategy - WACC Review; a Lower Rfr and Adding C&ESG

For the first time in three years we are moving our WACC assumptions down. This is driven by a modestly lower (-25 bps) interpolated 10-year...

Forsyth Barr

Transport Trends - Where's the Freight, Mate?

Imports into New Zealand have slumped over 2023 as supply chain destocking has compounded slowing domestic consumption. The latter has softened...

Forsyth Barr

Regulated Companies - The Relevance of RAB Multiples

RAB multiples (enterprise value divided by regulatory asset base) provide a useful means of valuing and sense checking valuations for regulated...

Forsyth Barr

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