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.

Thematic (Sector/Industry)

<ul><li>August 2023 saw the big four generator/retailers report operating results in line with expectations, but collectively they guided to cost increases ~2.5x forecast FY24 inflation, tempering the earnings outlook.</li><li>Development continues apace with six generation and two battery projects costing ~NZ$2.5b expected to reach final investment decision (FID) in FY24, although a positive NZAS decision is likely a pre-requisite for most of the projects.</li><li>August 2023 share price performance for most of the generator/retailers was weak, resulting in dividend yield spreads climbing off record lows. </li></ul>

August 2023 saw the big four generator/retailers report operating results in line with expectations, but collectively they guided to cost increases ~2.5x forecast FY24 inflation, tempering the earnings outlook.Development continues apace with six generation and two battery projects costing ~NZ$2.5b expected to reach final investment decision (FID) in FY24, although a positive NZAS decision is likely a pre-requisite for most of the projects.August 2023 share price performance for most of the generator/retailers was weak, resulting in dividend yield spreads climbing off record lows. 

Power Points - Costs Crescendo — September 2023

Equity Bottom-Up

<ul><li>Contact Energy (CEN) is close to fully commissioning its 174MW Tauhara geothermal plant, the first in a series of what we expect to be four geothermal investments in the next six years.</li><li>We expect strong earnings growth over the next two financial years as a result, with FY24 expectations boosted by better than expected guidance.</li><li>We have lifted our FY24 EBITDAF forecast +5% to NZ$675m. CEN has also dropped strong hints that it will lift its FY24 dividend if NZAS stays.</li></ul>

Contact Energy (CEN) is close to fully commissioning its 174MW Tauhara geothermal plant, the first in a series of what we expect to be four geothermal investments in the next six years.We expect strong earnings growth over the next two financial years as a result, with FY24 expectations boosted by better than expected guidance.We have lifted our FY24 EBITDAF forecast +5% to NZ$675m. CEN has also dropped strong hints that it will lift its FY24 dividend if NZAS stays.

Contact Energy - Building a Head of Steam — FY23 Result

<ul><li>We are expecting the largest ever, single year increase in the collective EBITDAF earnings of the big four generator/retailers, up +18% in FY23 to NZ$2.7b.</li><li>In many ways it was the perfect year with acquisitions, new generation, record high hydro generation, strong retail margin growth and one-off gains lifting earnings.</li><li>For the first time ever, MCY will report the strongest earnings in the sector, aided by all of the factors noted. </li></ul>

We are expecting the largest ever, single year increase in the collective EBITDAF earnings of the big four generator/retailers, up +18% in FY23 to NZ$2.7b.In many ways it was the perfect year with acquisitions, new generation, record high hydro generation, strong retail margin growth and one-off gains lifting earnings.For the first time ever, MCY will report the strongest earnings in the sector, aided by all of the factors noted. 

Electricity Sector - Step Change — FY23 Preview

<div><div><div><div><ul><li>July 2023 saw above average hydro conditions continue, with the exception of the lower South Island.</li><li>The big news of the month came from the Government reversing its emissions trading scheme (ETS) settings decision, which helped carbon prices recover to ~NZ$60/unit from a low of ~NZ$35/unit in late June 2023.</li><li>Electricity stocks continue to perform well despite interest rates edging higher and ASX futures prices edging lower as the market continues to favour risk off. </li></ul></div></div></div></div>

July 2023 saw above average hydro conditions continue, with the exception of the lower South Island.The big news of the month came from the Government reversing its emissions trading scheme (ETS) settings decision, which helped carbon prices recover to ~NZ$60/unit from a low of ~NZ$35/unit in late June 2023.Electricity stocks continue to perform well despite interest rates edging higher and ASX futures prices edging lower as the market continues to favour risk off. 

Power Points - Offshore Wind Brewing - August 2023

<ul><li>We calculate that Contact Energy (CEN) finished FY23 with a record monthly EBITDAF of NZ$83m, although that was boosted by a significant one-off gain and an abnormally low LWAP/GWAP ratio.</li><li>CEN is also making an accounting change that will boost reported EBITDAF a further ~+NZ$22m to NZ$575m, however, from our perspective, we will continue to treat market making gains and losses as operating earnings.</li><li>With little change to later forecasts, we leave our target price unchanged at NZ$8.30 at retain our NEUTRAL rating.</li></ul>

We calculate that Contact Energy (CEN) finished FY23 with a record monthly EBITDAF of NZ$83m, although that was boosted by a significant one-off gain and an abnormally low LWAP/GWAP ratio.CEN is also making an accounting change that will boost reported EBITDAF a further ~+NZ$22m to NZ$575m, however, from our perspective, we will continue to treat market making gains and losses as operating earnings.With little change to later forecasts, we leave our target price unchanged at NZ$8.30 at retain our NEUTRAL rating.

Contact Energy: One-Off Gains - June 2023 Op Stats

New Zealand

Contact Energy Limited is a diversified and integrated energy company which focuses on the generation of electricity and the sale of electricity and gas in New Zealand.

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Contact Energy (CEN NZ)

Power Points - Costs Crescendo — September 2023

August 2023 share price performance for most of the generator/retailers was weak, resulting in dividend yield spreads climbing off record lows.

Forsyth Barr

Contact Energy - Building a Head of Steam — FY23 Result

Contact Energy (CEN) is close to fully commissioning its 174MW Tauhara geothermal plant, the first in a series of what we expect to be four...

Forsyth Barr

Electricity Sector - Step Change — FY23 Preview

We are expecting the largest ever, single year increase in the collective EBITDAF earnings of the big four generator/retailers, up +18% in FY23 to...

Forsyth Barr

Power Points - Offshore Wind Brewing - August 2023

Electricity stocks continue to perform well despite interest rates edging higher and ASX futures prices edging lower as the market continues to...

Forsyth Barr

Contact Energy: One-Off Gains - June 2023 Op Stats

We calculate that Contact Energy (CEN) finished FY23 with a record monthly EBITDAF of NZ$83m, although that was boosted by a significant one-off...

Forsyth Barr

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