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>The Commerce Commission (ComCom) released its draft decision for Chorus' (CNU) maximum allowable revenue (MAR) over its second regulatory period (RP2) covering CY25–CY28.</li><li>With the WACC and (draft) opex/capex known, the main unknown in the release is related to the treatment of depreciation and its expected wash-up from RP1.</li><li>Both were broadly in line with our (and we assume CNU's) expectations. </li></ul>

The Commerce Commission (ComCom) released its draft decision for Chorus' (CNU) maximum allowable revenue (MAR) over its second regulatory period (RP2) covering CY25–CY28.With the WACC and (draft) opex/capex known, the main unknown in the release is related to the treatment of depreciation and its expected wash-up from RP1.Both were broadly in line with our (and we assume CNU's) expectations. 

<ul><li>Chorus (CNU) reported an in-line 1H24 result across the board.</li><li>Greater than 90% of the value of CNU now sits with its regulated fibre assets where the regulatory regime is increasingly predictable.</li><li>The remaining areas of uncertainty relate to: (1) what, if anything, is the value of the copper tail. Management expects that copper will remain cash flow positive — we are not fully convinced; (2) unregulated non-copper earnings. </li></ul>

Chorus (CNU) reported an in-line 1H24 result across the board.Greater than 90% of the value of CNU now sits with its regulated fibre assets where the regulatory regime is increasingly predictable.The remaining areas of uncertainty relate to: (1) what, if anything, is the value of the copper tail. Management expects that copper will remain cash flow positive — we are not fully convinced; (2) unregulated non-copper earnings. 

Chorus - No Surprises, Just What the Doctor Ordered

<ul><li>Chorus (CNU) will report its 1H24 result on Tuesday, 27 February.</li><li>Overall, we expect there to be limited room for any operational surprises nor any significant updates on its RP2 process following its capex update earlier in the month.</li><li>The key focuses of the result are: (1) the shape of cash flow in its legacy copper business. We estimate CY24 will mark a substantial step down in legacy capex, opex, and revenues. </li></ul>

Chorus (CNU) will report its 1H24 result on Tuesday, 27 February.Overall, we expect there to be limited room for any operational surprises nor any significant updates on its RP2 process following its capex update earlier in the month.The key focuses of the result are: (1) the shape of cash flow in its legacy copper business. We estimate CY24 will mark a substantial step down in legacy capex, opex, and revenues. 

Chorus - In the Regulatory Waiting Room, Take RP2

<ul><li>Chorus (CNU) has guided towards long-term sustainable dividend growth.</li><li>To achieve this CNU needs to balance the need to invest enough capex to grow its Regulated Asset Base (RAB) with the short/medium-term need to leave enough free cash flow to grow its dividend, a difficult balancing act.</li><li>At its FY23 results, CNU reported slightly higher than anticipated capex and also guided towards substantially higher capex than we had anticipated for FY24. </li></ul>

Chorus (CNU) has guided towards long-term sustainable dividend growth.To achieve this CNU needs to balance the need to invest enough capex to grow its Regulated Asset Base (RAB) with the short/medium-term need to leave enough free cash flow to grow its dividend, a difficult balancing act.At its FY23 results, CNU reported slightly higher than anticipated capex and also guided towards substantially higher capex than we had anticipated for FY24. 

Chorus - Having the Cake or Eating It? A Balancing Act

<ul><li>Chorus (CNU) will report its FY23 result on Monday, 21 August 2023.</li><li>CNU is guiding to EBITDA between NZ$668m to NZ$683m after including NZ$7m of flood and cyclone related costs it flagged at its 4Q23 update.</li><li>We update our forecasts for the latest connections and these costs, and our FY23 EBITDA falls to NZ$672m (consensus NZ$683m). </li></ul>

Chorus (CNU) will report its FY23 result on Monday, 21 August 2023.CNU is guiding to EBITDA between NZ$668m to NZ$683m after including NZ$7m of flood and cyclone related costs it flagged at its 4Q23 update.We update our forecasts for the latest connections and these costs, and our FY23 EBITDA falls to NZ$672m (consensus NZ$683m). 

Chorus - FY23 Preview — Focus Shifts to RP2

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Chorus Ltd (CNU NZ)

Chorus - Regulatory Wheels Keep Turning

The Commerce Commission (ComCom) released its draft decision for Chorus' (CNU) maximum allowable revenue (MAR) over its second regulatory period...

Forsyth Barr

Chorus - No Surprises, Just What the Doctor Ordered

Greater than 90% of the value of CNU now sits with its regulated fibre assets where the regulatory regime is increasingly predictable.

Forsyth Barr

Chorus - In the Regulatory Waiting Room, Take RP2

Overall, we expect there to be limited room for any operational surprises nor any significant updates on its RP2 process following its capex update...

Forsyth Barr

Chorus - Having the Cake or Eating It? A Balancing Act

At its FY23 results, CNU reported slightly higher than anticipated capex and also guided towards substantially higher capex than we had anticipated...

Forsyth Barr

Chorus - FY23 Preview — Focus Shifts to RP2

CNU is guiding to EBITDA between NZ$668m to NZ$683m after including NZ$7m of flood and cyclone related costs it flagged at its 4Q23 update.

Forsyth Barr

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