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 upgrade our rating on EBOS Group (EBO) to OUTPERFORM.</li><li>Our upgrade reflects: (1) relatively undemanding valuation versus peers and its own history, particularly given the shift in EBO's business towards higher growth and higher margin segments, and our analysis of EBO's organic growth (~+6% since the Symbion acquisition in 2013) which we think can at least be maintained over the medium-term, (2) solid recent trends, and (3) continued comfort levels on FY25 consensus expectations post the Chemist Warehouse (CW) contract loss. </li><li>EBO is a high quality defensive business with a robust organic growth profile and M&amp;A upside (we estimate FY25 debt headroom of A$500m).</li></ul>

We upgrade our rating on EBOS Group (EBO) to OUTPERFORM.Our upgrade reflects: (1) relatively undemanding valuation versus peers and its own history, particularly given the shift in EBO's business towards higher growth and higher margin segments, and our analysis of EBO's organic growth (~+6% since the Symbion acquisition in 2013) which we think can at least be maintained over the medium-term, (2) solid recent trends, and (3) continued comfort levels on FY25 consensus expectations post the Chemist Warehouse (CW) contract loss. EBO is a high quality defensive business with a robust organic growth profile and M&amp;A upside (we estimate FY25 debt headroom of A$500m).

EBOS Group - Inexpensive Defensive; Up to OUTPERFORM

<ul><li>Following our scenarios to assess the impact of the Chemist Warehouse (CW) contract loss in FY25, we walk away with increased comfort that EBO can navigate the loss without significant downside to current FY25 consensus expectations.</li><li>Representing only ~2% of EBO's group EBIT, we also think EBO should be able to absorb the loss of NZ CW supply contract which ends in 1H27 (should the recent competition changes drive this outcome).</li><li>In combination, our analysis provides increased confidence in the earnings outlook, however, we continue to see valuation as elevated in relative and absolute terms (even reflecting EBO's execution and change in business mix). Retain NEUTRAL. </li></ul>

Following our scenarios to assess the impact of the Chemist Warehouse (CW) contract loss in FY25, we walk away with increased comfort that EBO can navigate the loss without significant downside to current FY25 consensus expectations.Representing only ~2% of EBO's group EBIT, we also think EBO should be able to absorb the loss of NZ CW supply contract which ends in 1H27 (should the recent competition changes drive this outcome).In combination, our analysis provides increased confidence in the earnings outlook, however, we continue to see valuation as elevated in relative and absolute terms (even reflecting EBO's execution and change in business mix). Retain NEUTRAL. 

<ul><li>EBOS Group's (EBO) 1H24 result was solid. Importantly, (1) EBO's pharmacy performance and commentary should help allay fears around deteriorating industry dynamics, and (2) EBO continues to see solid cost-out opportunities.</li><li>While broader business trends remain constructive, EBO is trading on a FY25 PE of ~22x, modestly ahead of its 10 year average, and a ~+30% premium to the market median.</li><li>We back management to negate the possible negative operating leverage (EBO has several levers it can pull), but FY25 earnings are not risk-free as EBO transitions through the Chemist Warehouse (CW) contract loss. </li></ul>

EBOS Group's (EBO) 1H24 result was solid. Importantly, (1) EBO's pharmacy performance and commentary should help allay fears around deteriorating industry dynamics, and (2) EBO continues to see solid cost-out opportunities.While broader business trends remain constructive, EBO is trading on a FY25 PE of ~22x, modestly ahead of its 10 year average, and a ~+30% premium to the market median.We back management to negate the possible negative operating leverage (EBO has several levers it can pull), but FY25 earnings are not risk-free as EBO transitions through the Chemist Warehouse (CW) contract loss. 

EBOS Group - 1H24 Result — In Good Health

<ul><li>With the first four months of trading already released, it is unlikely that EBOS Group's (EBO) 1H24 result will surprise.</li><li>We expect it to be a typically solid result. Key focus areas are: (1) cost out initiatives in light of the pending Chemist Warehouse (CW) contract loss (or at least commentary on the outlook), (2) pharmacy industry dynamics, and (3) M&amp;A outlook/strategy in light of the considered Greencross deal in November.</li></ul>

With the first four months of trading already released, it is unlikely that EBOS Group's (EBO) 1H24 result will surprise.We expect it to be a typically solid result. Key focus areas are: (1) cost out initiatives in light of the pending Chemist Warehouse (CW) contract loss (or at least commentary on the outlook), (2) pharmacy industry dynamics, and (3) M&amp;A outlook/strategy in light of the considered Greencross deal in November.

EBOS Group - 1H24 Preview — Costs & Chemist Warehouse

<ul><li>EBOS Group's (EBO) 1Q24 ASM trading update was broadly in line with our expectations, showing a solid start to FY24.</li><li>1Q24 organic EBITDA growth of ~+8% is consistent with 2H23, and the update is further evidence that EBO has entered its new phase of organic growth more akin to historical levels (mid to high single digits), rather than sustaining its growth rates over the past three years.</li><li>Consistent with history, no full year guidance was provided and given the in line trading update we leave our earnings estimates unchanged. </li></ul>

EBOS Group's (EBO) 1Q24 ASM trading update was broadly in line with our expectations, showing a solid start to FY24.1Q24 organic EBITDA growth of ~+8% is consistent with 2H23, and the update is further evidence that EBO has entered its new phase of organic growth more akin to historical levels (mid to high single digits), rather than sustaining its growth rates over the past three years.Consistent with history, no full year guidance was provided and given the in line trading update we leave our earnings estimates unchanged. 

New Zealand

EBOS Group Limited supplies and distributes medical consumable products and equipment to the hospital and primary care sectors of the New Zealand and Australian healthcare markets. The Company's products include diagnostic instruments, surgical instruments and prosthesis, feminine protection, anesthetic equipment, and other consumer products.

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Ebos Group Ltd (EBO NZ)

EBOS Group - Inexpensive Defensive; Up to OUTPERFORM

EBO is a high quality defensive business with a robust organic growth profile and M&A upside (we estimate FY25 debt headroom of A$500m).

Forsyth Barr

EBOS Group - The Final CW Check-Up

Following our scenarios to assess the impact of the Chemist Warehouse (CW) contract loss in FY25, we walk away with increased comfort that EBO can...

Forsyth Barr

EBOS Group - 1H24 Result — In Good Health

While broader business trends remain constructive, EBO is trading on a FY25 PE of ~22x, modestly ahead of its 10 year average, and a ~+30% premium...

Forsyth Barr

EBOS Group - 1H24 Preview — Costs & Chemist Warehouse

With the first four months of trading already released, it is unlikely that EBOS Group's (EBO) 1H24 result will surprise. We expect it to be a...

Forsyth Barr

EBOS Group - 101st AGM — On Script

Consistent with history, no full year guidance was provided and given the in line trading update we leave our earnings estimates unchanged.

Forsyth Barr

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