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>Despite confirming consensus expectations less than three months ago, Synlait Milk's (SML) -60% FY23 NPAT downgrade again highlights (1) the high degree of operating leverage within the business, and (2) transparency on key drivers remains very limited</li><li>Headline valuation multiples (~11x FY24 PE and ~0.9x FY24 EV/IC) are not overly demanding, particularly relative to its own history.</li><li>To justify a change in investment view we require evidence of strategic execution to gain confidence in SML's earnings and returns trajectory.</li></ul>

Despite confirming consensus expectations less than three months ago, Synlait Milk's (SML) -60% FY23 NPAT downgrade again highlights (1) the high degree of operating leverage within the business, and (2) transparency on key drivers remains very limitedHeadline valuation multiples (~11x FY24 PE and ~0.9x FY24 EV/IC) are not overly demanding, particularly relative to its own history.To justify a change in investment view we require evidence of strategic execution to gain confidence in SML's earnings and returns trajectory.

<ul><li>Synlait Milk (SML) has provided first-time FY23 NPAT guidance of NZ$15-25m. This is well below us and market consensus (~NZ$53m).</li><li>SML’s guidance follows its late December 2022 1H23 (six months to January 2023) earnings guidance for NPAT to be &lt;NZ$14.5m.</li><li>SML now expects its two year recovery plan to take three years – implying FY25 NPAT of ~NZ$75m (previously expected to return to these levels in FY24).</li></ul>

Synlait Milk (SML) has provided first-time FY23 NPAT guidance of NZ$15-25m. This is well below us and market consensus (~NZ$53m).SML’s guidance follows its late December 2022 1H23 (six months to January 2023) earnings guidance for NPAT to be &lt;NZ$14.5m.SML now expects its two year recovery plan to take three years – implying FY25 NPAT of ~NZ$75m (previously expected to return to these levels in FY24).

Synlait Milk (SML): FY23 Guidance – Déjà Vu – Another Downgrade

<ul><li>Synlait Milk's (SML) 1H23 guidance for normalised NPAT to be below 1H22 (NZ$14.5m) appears to be a timing issue — it is not quite as the headline suggests</li><li>The positive is there is no change to key medium-term value drivers</li><li>The negative is SML's 1H23 ingredients and lactofferin volumes are well below our prior expectations, which is likely to drive a sequential net debt increase in 1H23 and keep gearing elevated (for now)</li></ul>

Synlait Milk's (SML) 1H23 guidance for normalised NPAT to be below 1H22 (NZ$14.5m) appears to be a timing issue — it is not quite as the headline suggestsThe positive is there is no change to key medium-term value driversThe negative is SML's 1H23 ingredients and lactofferin volumes are well below our prior expectations, which is likely to drive a sequential net debt increase in 1H23 and keep gearing elevated (for now)

<ul><li>Synlait Milk (SML) has provided 1H23 profit guidance to be “down” on 1H22.</li><li>FY23 qualitative guidance is unchanged and SML still expects net debt to EBITDA to be between 2.0x to 2.5x.</li><li>We currently forecast a net debt decline to NZ$301m (from NZ$340m at FY22) and EBITDA of NZ$157m (ND/EBITDA of 1.92x).</li></ul>

Synlait Milk (SML) has provided 1H23 profit guidance to be “down” on 1H22.FY23 qualitative guidance is unchanged and SML still expects net debt to EBITDA to be between 2.0x to 2.5x.We currently forecast a net debt decline to NZ$301m (from NZ$340m at FY22) and EBITDA of NZ$157m (ND/EBITDA of 1.92x).

<ul><li>Synlait Milk (SML) reported a solid FY22 result broadly in-line with our and consensus expectations showing robust execution against what remains a difficult backdrop</li><li>FY22 was SML's first period of positive free cash flow since FY17 as it exits its elevated capex phase</li><li>The key positive in the result was debt reduction ahead of our expectations driven by working capital improvements</li></ul>

Synlait Milk (SML) reported a solid FY22 result broadly in-line with our and consensus expectations showing robust execution against what remains a difficult backdropFY22 was SML's first period of positive free cash flow since FY17 as it exits its elevated capex phaseThe key positive in the result was debt reduction ahead of our expectations driven by working capital improvements

Synlait Milk: FY22 Result — Edging Ahead

New Zealand

Synlait Milk Ltd is a milk production company.  The Company produces, processes, markets and distributes milk, milk powder products and ingredients.

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Synlait Milk (SML NZ)

Synlait Milk: As Clear As Milk

Despite confirming consensus expectations less than three months ago, Synlait Milk's (SML) -60% FY23 NPAT downgrade again highlights (1) the high...

Forsyth Barr

Synlait Milk (SML): FY23 Guidance – Déjà Vu – Another Downgrade

Synlait Milk (SML) has provided first-time FY23 NPAT guidance of NZ$15-25m, wherein its guidance follows its late December 2022 1H23 (six months to...

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Synlait Milk: Timing Is Everything?

Synlait Milk's (SML) 1H23 guidance for normalised NPAT to be below 1H22 (NZ$14.5m) appears to be a timing issue — it is not quite as the headline...

Forsyth Barr

Synlait Milk (SML): 1H23 Guidance Update

Synlait Milk (SML) has provided 1H23 profit guidance to be “down” on 1H22: We understand this applies to normalised NPAT (NZ$14.5m in 1H22 after...

Forsyth Barr

Synlait Milk: FY22 Result — Edging Ahead

Synlait Milk (SML) reported a solid FY22 result broadly in-line with our and consensus expectations showing robust execution against what remains a...

Forsyth Barr

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