Investment Strategist, Transparently.AI

Mark Jolley

Investment Strategist

AI detection of accounting fraud and manipulation

Transparently.AI

Fraud and manipulation of their numbers see companies lose USD1 trillion+ per year for their stakeholders. Transparently.AI has developed an AI system that determines:

1. The likelihood that a company is committing fraud/serious manipulation of their books;
2. Whether it is serious enough to result in total corporate failure;
3. Estimated $ losses to stakeholders;
4. How that manipulation/fraud evolves through time; and
5. Detailed analytics on the forms of manipulation/fraud (e.g. which parts of the accounts, what tricks of the trade, questions for analysts to ask management, where/how to investigate further, etc.).

This is effectively automating the analysis of forensic accountants, activist short sellers, credit analysts, etc to do work that would typically take weeks per company, and instead run it in seconds and for thousands of companies simultaneously.

Critically, this solution frequently alerts users to the presence of serious manipulation risk up to 2-3 years in advance of the wider market and short sellers becoming aware of problems.

Forensic Accounting

<ul>
<li>Embattled Kiwi building materials giant announced emergency fundraise in September</li>
<li>Accounting quality has deteriorated significantly in recent years, AI tool shows</li>
<li>Share price is a quarter of its 2007 peak, company leadership is in flux</li>
</ul>


Embattled Kiwi building materials giant announced emergency fundraise in September
Accounting quality has deteriorated significantly in recent years, AI tool shows
Share price is a quarter of its 2007 peak, company leadership is in flux


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>Fletcher Building (FBU) is raising NZ$700m of equity to lower its elevated debt position. We calculate the raise is high-teens dilutive, adding +37% to shares on issue.</li><li>While the raise is unsurprising, given elevated gearing, volatile trading conditions, and an incoming management team, it has come sooner than we expected.</li><li>The new CEO is a week away from beginning his tenure, and the company just told investors that it was comfortable with its balance sheet at its FY24 result in late August. </li></ul>

Fletcher Building (FBU) is raising NZ$700m of equity to lower its elevated debt position. We calculate the raise is high-teens dilutive, adding +37% to shares on issue.While the raise is unsurprising, given elevated gearing, volatile trading conditions, and an incoming management team, it has come sooner than we expected.The new CEO is a week away from beginning his tenure, and the company just told investors that it was comfortable with its balance sheet at its FY24 result in late August. 

<ul><li>Fletcher Building (FBU) announced that it has agreed terms with the Western Australian government and most builders for a joint industry response (JIR) to remediate leaking Pro-Fit pipes.</li><li>Under the JIR, FBU will fund 80% of the A$150m estimated cost of repairs over five years.</li><li>Although a significant portion, given FBU still believes the leaks are an install issue, it has successfully avoided a product recall and legal action from participating builders and homeowners — a win for FBU. BGC, the largest builder to use Pro-Fit, is not yet part of the JIR and has stated that while it is open to joining it has significant concerns around the quantum and terms of FBU's funding. </li></ul>

Fletcher Building (FBU) announced that it has agreed terms with the Western Australian government and most builders for a joint industry response (JIR) to remediate leaking Pro-Fit pipes.Under the JIR, FBU will fund 80% of the A$150m estimated cost of repairs over five years.Although a significant portion, given FBU still believes the leaks are an install issue, it has successfully avoided a product recall and legal action from participating builders and homeowners — a win for FBU. BGC, the largest builder to use Pro-Fit, is not yet part of the JIR and has stated that while it is open to joining it has significant concerns around the quantum and terms of FBU's funding. 

<ul><li>Fletcher Building's (FBU) FY24 result did little to ease concerns around its balance sheet.</li><li>While year end net debt was below expectations, it will rise over 1H25, despite asset sales.</li><li>Underlying demand continues to deteriorate, while new management has yet to take the helm, and unresolved, potentially large, known unknowns remain. </li></ul>

Fletcher Building's (FBU) FY24 result did little to ease concerns around its balance sheet.While year end net debt was below expectations, it will rise over 1H25, despite asset sales.Underlying demand continues to deteriorate, while new management has yet to take the helm, and unresolved, potentially large, known unknowns remain. 

Fletcher Building - FY24 Result — The Cycle Bites

<ul><li>Fletcher Building (FBU) will report its FY24 result on Wednesday, 21 August.</li><li>We expect FY24 EBIT of NZ$514m, down materially on FY23, but in the middle of FBU's guidance range of NZ$500m–$530m EBIT, which includes NZ$10m–$15m of restructuring costs.</li><li>Areas of focus will be: (1) the balance sheet given elevated debt levels, (2) an update on WA pipes and legacy construction projects, and (3) current trading and outlook comments, given slowing construction activity. </li></ul>

Fletcher Building (FBU) will report its FY24 result on Wednesday, 21 August.We expect FY24 EBIT of NZ$514m, down materially on FY23, but in the middle of FBU's guidance range of NZ$500m–$530m EBIT, which includes NZ$10m–$15m of restructuring costs.Areas of focus will be: (1) the balance sheet given elevated debt levels, (2) an update on WA pipes and legacy construction projects, and (3) current trading and outlook comments, given slowing construction activity. 

Fletcher Building - FY24 Preview — Tools Down

New Zealand

Fletcher Building Limited manufactures, distributes, and sells materials for the building industry including wood fiber-based products, cement and aggregates, plasterboard, laminates, lumber, and aluminium extrusion. The Company operates primarily in New Zealand and Australia.

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Fletcher Building (FBU NZ)

Fletcher Building: Plugging the Leaks

Fletcher Building's accounting quality has deteriorated significantly in recent years, according to an AI tool that analyzes company balance sheets...

Mark Jolley

Fletcher Building - Repaying the Bank

Fletcher Building (FBU) is raising NZ$700m of equity to lower its elevated debt position. We calculate the raise is high-teens dilutive, adding...

Forsyth Barr

Fletcher Building - Paying the Piper

Fletcher Building (FBU) announced that it has agreed terms with the Western Australian government and most builders for a joint industry response...

Forsyth Barr

Fletcher Building - FY24 Result — The Cycle Bites

Looking through cyclically low near-term earnings, FBU is trading on a two-year forward PE of 11.5x, which is in line with its long run average....

Forsyth Barr

Fletcher Building - FY24 Preview — Tools Down

We expect FY24 EBIT of NZ$514m, down materially on FY23, but in the middle of FBU's guidance range of NZ$500m–$530m EBIT, which includes...

Forsyth Barr

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