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>Consistent with its pre-release at its 21 October 2022 investor day, Mainfreight (MFT) reported 1H23 PBT up +66%, and a similar increase in NPAT</li><li>As anticipated MFT’s stellar growth profile over the past two years is slowing and likely to reverse as sea freight rate pressures impact A&amp;O earnings</li><li>MFT is “confident of trading conditions for the remainder of the financial year, albeit cognisant of economic headwinds and declining sea freight rates and volumes leading into the New Year”</li></ul>

Consistent with its pre-release at its 21 October 2022 investor day, Mainfreight (MFT) reported 1H23 PBT up +66%, and a similar increase in NPATAs anticipated MFT’s stellar growth profile over the past two years is slowing and likely to reverse as sea freight rate pressures impact A&amp;O earningsMFT is “confident of trading conditions for the remainder of the financial year, albeit cognisant of economic headwinds and declining sea freight rates and volumes leading into the New Year”

Mainfreight: 1H23 Result Initial Thoughts

<ul><li>In contrast, MFT's very strong 1H23 provisional result and bullish investor day commentary highlight further customer wins, strong momentum in network development, and margin improvement strategies across its three core products, particularly Air &amp; Ocean (A&amp;O).</li><li>We broadly reverse our downgrades from last week, but more importantly accept a higher level of sustainability within current A&amp;O profits and higher customer win driven growth over the medium term, despite cyclical risks.</li><li>MFT now trades on ~16x PE on our revised earnings estimates, which more than compensates investors for current A&amp;O over-earning.</li></ul>

In contrast, MFT's very strong 1H23 provisional result and bullish investor day commentary highlight further customer wins, strong momentum in network development, and margin improvement strategies across its three core products, particularly Air &amp; Ocean (A&amp;O).We broadly reverse our downgrades from last week, but more importantly accept a higher level of sustainability within current A&amp;O profits and higher customer win driven growth over the medium term, despite cyclical risks.MFT now trades on ~16x PE on our revised earnings estimates, which more than compensates investors for current A&amp;O over-earning.

Mainfreight: Blue Blood Transfusion; Upgrade to OUTPERFORM

<ul><li>Mainfreight (MFT) is not immune to the current challenges facing the global freight sector</li><li>We expect earnings growth to slow through FY23, from very high levels following an excellent first four months, as rapidly declining sea freight rates dampen its Air &amp; Ocean (A&amp;O)  segment profitability</li><li>Momentum in Transport and Warehousing has been impressive, highlighting MFT's competitive advantage and favourable growth characteristics</li></ul>

Mainfreight (MFT) is not immune to the current challenges facing the global freight sectorWe expect earnings growth to slow through FY23, from very high levels following an excellent first four months, as rapidly declining sea freight rates dampen its Air &amp; Ocean (A&amp;O)  segment profitabilityMomentum in Transport and Warehousing has been impressive, highlighting MFT's competitive advantage and favourable growth characteristics

Mainfreight: Tide Going Out on Sea Freight Rates

Thematic (Sector/Industry)

<ul><li>Freightways (FRE): We are attracted to FRE due to (1) the strength of new customer, (2) further pricing for effort opportunities, and (3) the disciplined expansion into the Australian express freight market</li><li>Mainfreight (MFT): MFT is a high quality business with a proven track record for growth</li><li>Port of Tauranga (POT): POT offers attractive defensive characteristics in the current environment</li></ul>

Freightways (FRE): We are attracted to FRE due to (1) the strength of new customer, (2) further pricing for effort opportunities, and (3) the disciplined expansion into the Australian express freight marketMainfreight (MFT): MFT is a high quality business with a proven track record for growthPort of Tauranga (POT): POT offers attractive defensive characteristics in the current environment

<ul><li>Pressure on container rates continues: Container shipping spot rates have declined significantly since their peak in September 2021</li><li>Peers upgrade cycle slowing: MFT enjoyed a further step-up in consensus earnings following its annual shareholder meeting (ASM) in late July 2022</li><li>Base business growing: Transport performance through early FY23 has been strong as signalled at the ASM</li></ul>

Pressure on container rates continues: Container shipping spot rates have declined significantly since their peak in September 2021Peers upgrade cycle slowing: MFT enjoyed a further step-up in consensus earnings following its annual shareholder meeting (ASM) in late July 2022Base business growing: Transport performance through early FY23 has been strong as signalled at the ASM

Mainfreight: Supercycle Tailwinds Gradually Ebbing

New Zealand

Mainfreight Limited provides and supplies freight, warehousing and logistics services throughout New Zealand and Australia.  The Company provides freight forwarding services by road, rail, sea and air along with providing international freight forwarding services, customs clearance services and specialized handling of hazardous substances.

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Mainfreight Ltd (MFT NZ)

Mainfreight: 1H23 Result Initial Thoughts

Consistent with its pre-release at its 21 October 2022 investor day, Mainfreight (MFT) reported 1H23 PBT up +66%, and a similar increase in NPAT;...

Forsyth Barr

Mainfreight: Blue Blood Transfusion; Upgrade to OUTPERFORM

MFT's very strong 1H23 provisional result and bullish investor day commentary highlight further customer wins, strong momentum in network development

Forsyth Barr

Mainfreight: Tide Going Out on Sea Freight Rates

Mainfreight (MFT) is not immune to the current challenges facing the global freight sector; We expect earnings growth to slow through FY23, from...

Forsyth Barr

Transport Trends: Mixed Bag

The post-pandemic world is a mixed bag for the transport sector: aviation is enjoying an expected and much needed resurgence; global airfreight...

Forsyth Barr

Mainfreight: Supercycle Tailwinds Gradually Ebbing

The fragmented nature of Mainfreight's (MFT) customer base and its strong ability to add new ones means there is a high dependency on faith based...

Forsyth Barr

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