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>Oceania Healthcare (OCA) reported a mixed FY23 result which included some clear positives and some clear negatives</li><li>On the positive side, record high new sales margins and pricing were a standout, demonstrating that the product that OCA is bringing to market can fetch premium pricing.</li><li>But it was not all good news.  The all-important care premium revenues were substantially below our estimates, as was traditional care revenues which only grew +2% sequentially, compared to RYM’s +7%.</li></ul>

Oceania Healthcare (OCA) reported a mixed FY23 result which included some clear positives and some clear negativesOn the positive side, record high new sales margins and pricing were a standout, demonstrating that the product that OCA is bringing to market can fetch premium pricing.But it was not all good news.  The all-important care premium revenues were substantially below our estimates, as was traditional care revenues which only grew +2% sequentially, compared to RYM’s +7%.

Oceania Healthcare (OCA): FY23 Result – First Impressions

<ul><li>OCA has taken a different path to its three listed peers, with a high focus on building care suites, transforming profitability within care.</li><li>OCA generates ~40% of underlying EBITDA from care, of which the majority comes from care suites.</li><li>We expect 15–20% growth in care suite annuity earnings, more than offsetting headwinds in traditional care.</li></ul>

OCA has taken a different path to its three listed peers, with a high focus on building care suites, transforming profitability within care.OCA generates ~40% of underlying EBITDA from care, of which the majority comes from care suites.We expect 15–20% growth in care suite annuity earnings, more than offsetting headwinds in traditional care.

Oceania Healthcare: FY23 Preview — Care Suites To the Rescue?

Thematic (Sector/Industry)

<ul><li>Covenants are not created equal; we do not forecast any breaches, and if it gets close, we expect leniency from the banks</li><li>Level of debt likely a key driver of performance over next 18 months — OCA and RYM best positioned</li><li>In theory an inflationary environment should be good news for aged care stocks</li></ul>

Covenants are not created equal; we do not forecast any breaches, and if it gets close, we expect leniency from the banksLevel of debt likely a key driver of performance over next 18 months — OCA and RYM best positionedIn theory an inflationary environment should be good news for aged care stocks

Aged Care Sector: Tide Is Going Out; Debt Coming to the Surface

<ul><li>Our Montgomerie-Ibbotson (MI) index decreased very slightly in November, down -0.1% versus October 2022 and up +5.1% vs November 2021</li><li>The incremental COVID pricing buffer built up during the house price rally in 2020 and 2021 is now, on average, fully depleted, as New Zealand faces its biggest nominal house price decline for at least 50 years</li><li>The glass half empty approach would be to focus on the depleted buffer, while the glass half full approach focusses on the ability for the aged care operators to hold prices stable in the midst of a sharp housing downturn</li></ul>

Our Montgomerie-Ibbotson (MI) index decreased very slightly in November, down -0.1% versus October 2022 and up +5.1% vs November 2021The incremental COVID pricing buffer built up during the house price rally in 2020 and 2021 is now, on average, fully depleted, as New Zealand faces its biggest nominal house price decline for at least 50 yearsThe glass half empty approach would be to focus on the depleted buffer, while the glass half full approach focusses on the ability for the aged care operators to hold prices stable in the midst of a sharp housing downturn

Aged Care Sector: Montgomerie-Ibbotson Aged Care Pricing Index (13-Dec-2022)

<ul><li>The RBNZ has done its best to make sure none of us approach 2023 with any illusions of good times ahead</li><li>Mortgage rates have hit a 10 year high, inflation is expected to remain stubbornly elevated, and the icing on RBNZ's economic cake is its forecast of four quarters of declining GDP</li><li>When choosing our five stocks to watch we have leaned on companies with the majority of their exposure overseas (Infratil [IFT], Vulcan Steel [VSL], KMD Brands [KMD]) or with attractive valuations (Oceania Healthcare [OCA], SkyCity [SKC]) where we think that the bad news is firmly in the price</li></ul>

The RBNZ has done its best to make sure none of us approach 2023 with any illusions of good times aheadMortgage rates have hit a 10 year high, inflation is expected to remain stubbornly elevated, and the icing on RBNZ's economic cake is its forecast of four quarters of declining GDPWhen choosing our five stocks to watch we have leaned on companies with the majority of their exposure overseas (Infratil [IFT], Vulcan Steel [VSL], KMD Brands [KMD]) or with attractive valuations (Oceania Healthcare [OCA], SkyCity [SKC]) where we think that the bad news is firmly in the price

Equity Strategy - The Year Ahead: Five Themes and Five Stocks

New Zealand

Oceania Healthcare is New Zealand’s largest owners and operators of retirement villages.

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Oceania Healthcare (OCA NZ)

Oceania Healthcare (OCA): FY23 Result – First Impressions

Oceania Healthcare (OCA) reported a mixed FY23 result which included some clear positives and some clear negatives; On the positive side, record...

Forsyth Barr

Oceania Healthcare: FY23 Preview — Care Suites To the Rescue?

Oceania Healthcare (OCA) reports its FY23 result on Wednesday, 24 May; OCA has taken a different path to its three listed peers, with a high focus...

Forsyth Barr

Aged Care Sector: Tide Is Going Out; Debt Coming to the Surface

The three aged care stocks with March year ends (Ryman [RYM], Arvida [ARV] and Oceania [OCA]) have tripled net debt over the last five years; As a...

Forsyth Barr

Aged Care Sector: Montgomerie-Ibbotson Aged Care Pricing Index (13-Dec-2022)

Our Montgomerie-Ibbotson (MI) index decreased very slightly in November, down -0.1% versus October 2022 and up +5.1% vs November 2021 - this is the...

Forsyth Barr

Equity Strategy - The Year Ahead: Five Themes and Five Stocks

When choosing our five stocks to watch we have leaned on companies with the majority of their exposure overseas (Infratil [IFT], Vulcan...

Forsyth Barr

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