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>Solid result, flat guidance slightly below expectations: IPL reported FY23 adjusted funds from operations (AFFO) +9% to NZ$28.6m.</li><li>Management of interest costs a key focus: IPL has hedges in place which fix 92%/72%/64% of IPL's FY24/25/26 debt at a rate of 4.0%/3.8%/3.6% (including 2.0% line fee and margin).</li><li>Asset sales maintain flexibility but moderate earnings: FY23 gearing was 36.5% and committed gearing was 38.1%, towards the top end of IPL's target range of 30%–40% but below its bank debt covenant of 52.5%. </li></ul>

Solid result, flat guidance slightly below expectations: IPL reported FY23 adjusted funds from operations (AFFO) +9% to NZ$28.6m.Management of interest costs a key focus: IPL has hedges in place which fix 92%/72%/64% of IPL's FY24/25/26 debt at a rate of 4.0%/3.8%/3.6% (including 2.0% line fee and margin).Asset sales maintain flexibility but moderate earnings: FY23 gearing was 36.5% and committed gearing was 38.1%, towards the top end of IPL's target range of 30%–40% but below its bank debt covenant of 52.5%. 

Investore: FY23 Result — Through the Checkout

<ul><li>Investore (IPL) has reported FY23 adjusted funds from operations (AFFO) +10% to NZ$31.1m.</li><li>The result was slightly above our expectations with lower tax and maintenance capex the key drivers.</li><li>IPL continues to see turnover rent increase, +NZ$0.4m to NZ$1.4m in FY23 with 2H23 NZ$0.8m, with Countdown sales supported by solid food price inflation.</li></ul>

Investore (IPL) has reported FY23 adjusted funds from operations (AFFO) +10% to NZ$31.1m.The result was slightly above our expectations with lower tax and maintenance capex the key drivers.IPL continues to see turnover rent increase, +NZ$0.4m to NZ$1.4m in FY23 with 2H23 NZ$0.8m, with Countdown sales supported by solid food price inflation.

Investore: FY23 Result – Initial Thoughts

Thematic (Sector/Industry)

<ul><li>Flat month for the property sector: The NZ LPV sector was broadly flat in April, underperforming the NZX50G which was up +1.1%.</li><li>Looking ahead to the May reporting season: Low vacancy, solid tenant demand, and the high cost of new supply all continue to underpin solid rent growth.</li><li>Sector valuations track sideways: The property sector continues to look attractive relative to other yield stocks, however, spreads remain compressed when compared to long-term relationships to bond yields</li></ul>

Flat month for the property sector: The NZ LPV sector was broadly flat in April, underperforming the NZX50G which was up +1.1%.Looking ahead to the May reporting season: Low vacancy, solid tenant demand, and the high cost of new supply all continue to underpin solid rent growth.Sector valuations track sideways: The property sector continues to look attractive relative to other yield stocks, however, spreads remain compressed when compared to long-term relationships to bond yields

Real Estate Reflections: Gearing Up for Reporting Season

<ul><li>Property sector underperforms the broader market: The NZ LPV sector was down -1.2% in March, underperforming the NZX50G which was broadly flat.</li><li>Cap rates starting to creep higher: Goodman (GMT), Investore (IPL), Kiwi Property (KPG) and Stride (SPG) have all reported 2H23 valuation movements ahead of their full year results in May</li><li>Balance sheets remain in the spotlight: Portfolio valuation changes also lifted loan-to-value ratios</li></ul>

Property sector underperforms the broader market: The NZ LPV sector was down -1.2% in March, underperforming the NZX50G which was broadly flat.Cap rates starting to creep higher: Goodman (GMT), Investore (IPL), Kiwi Property (KPG) and Stride (SPG) have all reported 2H23 valuation movements ahead of their full year results in MayBalance sheets remain in the spotlight: Portfolio valuation changes also lifted loan-to-value ratios

Real Estate Reflections: Cap Rates Creep Higher

<ul><li>Revaluations primarily driven by expanding cap rates: the portfolio devaluation was due to (1) independent revaluations which saw a +67bps increase in portfolio cap rate in 2H23 to 5.70% (+20bps 1H23), and (2) increased allowances for seismic works which contributed -1% of the -12% total movement in portfolio value.</li><li>Asset devaluations largely priced in: the listed equity market had already more than priced this level of cap rate expansion/asset devaluation</li><li>Gearing creeping to the top of management's target range: IPL expects FY23 gearing to be 37% and we calculate committed gearing to be 39%, the top end of IPL's target range of 30%–40% but below its bank debt covenant of 52.5%</li></ul>

Revaluations primarily driven by expanding cap rates: the portfolio devaluation was due to (1) independent revaluations which saw a +67bps increase in portfolio cap rate in 2H23 to 5.70% (+20bps 1H23), and (2) increased allowances for seismic works which contributed -1% of the -12% total movement in portfolio value.Asset devaluations largely priced in: the listed equity market had already more than priced this level of cap rate expansion/asset devaluationGearing creeping to the top of management's target range: IPL expects FY23 gearing to be 37% and we calculate committed gearing to be 39%, the top end of IPL's target range of 30%–40% but below its bank debt covenant of 52.5%

Investore: Large Devaluation Already in the Price

New Zealand

Investore Property Limited operates as a real estate investment company. The Company invests in retail property assets. Investore Property also provides leasing services. Investore Property serves clients in New Zealand.

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Investore Property (IPL NZ)

Investore: FY23 Result — Through the Checkout

Investore (IPL) reported a solid FY23 result under pinned by acquisitions and rent growth, but mostly offset by higher interest...

Forsyth Barr

Investore: FY23 Result – Initial Thoughts

Investore (IPL) has reported FY23 adjusted funds from operations (AFFO) +10% to NZ$31.1m; IPL continues to see turnover rent increase, +NZ$0.4m to...

Forsyth Barr

Real Estate Reflections: Gearing Up for Reporting Season

April was a flat month for the listed property sector; Long-bond yields have been range bound for the last eight months, as tight yield spreads...

Forsyth Barr

Real Estate Reflections: Cap Rates Creep Higher

March was a mixed month for the property sector where interest rates are typically a key driver of LPV sector performance, but despite a -40bp fall...

Forsyth Barr

Investore: Large Devaluation Already in the Price

Investore's (IPL) 2H23 revaluations have resulted in a -12% reduction in the fair value of its property assets; A +67bp increase in the 2H23...

Forsyth Barr

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