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>Vector's (VCT) FY23 result, its last while owning 100% of the Metering business, was another solid performance with the main surprise coming from it announcing a 5.5cps special dividend.</li><li>Whilst FY24 EBITDA guidance is a little softer than expected, the bigger issue facing VCT is the electricity price reset and upcoming Commerce Commission (ComCom) input methodology decisions.</li><li>VCT will review its dividend policy after that December 2023 decision.</li></ul>

Vector's (VCT) FY23 result, its last while owning 100% of the Metering business, was another solid performance with the main surprise coming from it announcing a 5.5cps special dividend.Whilst FY24 EBITDA guidance is a little softer than expected, the bigger issue facing VCT is the electricity price reset and upcoming Commerce Commission (ComCom) input methodology decisions.VCT will review its dividend policy after that December 2023 decision.

Vector - Meting Out a Special Dividend — FY23 Result

Thematic (Sector/Industry)

<ul><li>For the first time in three years we are moving our WACC assumptions down.</li><li>This is driven by a modestly lower (-25 bps) interpolated 10-year interest rate assumption; our proxy for the risk free rate.</li><li>We also incorporate our C&amp;ESG ratings into our WACC assumptions. We do this on an overall neutral basis, with a scale of -25 bps to +25 bps added to the cost of equity. </li></ul>

For the first time in three years we are moving our WACC assumptions down.This is driven by a modestly lower (-25 bps) interpolated 10-year interest rate assumption; our proxy for the risk free rate.We also incorporate our C&amp;ESG ratings into our WACC assumptions. We do this on an overall neutral basis, with a scale of -25 bps to +25 bps added to the cost of equity. 

Equity Strategy - WACC Review; a Lower Rfr and Adding C&ESG

<ul><li>RAB multiples (enterprise value divided by regulatory asset base) provide a useful means of valuing and sense checking valuations for regulated companies.</li><li>The issue of RAB multiples has been brought up by numerous submitters in the current Commerce Commission (ComCom) Input Methodologies (IM) review process.</li><li>Some submitters have referenced Forsyth Barr reports, at times extensively (CEG in particular). </li></ul>

RAB multiples (enterprise value divided by regulatory asset base) provide a useful means of valuing and sense checking valuations for regulated companies.The issue of RAB multiples has been brought up by numerous submitters in the current Commerce Commission (ComCom) Input Methodologies (IM) review process.Some submitters have referenced Forsyth Barr reports, at times extensively (CEG in particular). 

Regulated Companies - The Relevance of RAB Multiples

<ul><li>Cost of capital tweaks could have been worse: We had expected the Commerce Commission (ComCom) to adjust regulatory cost of capital (WACC) parameters to help offset the rapid increase in interest rates over the past three years.</li><li>VCT misses out on removing asset indexation, results in funding challenges, particularly given big increase in future capex</li><li>Metering sale unconditional, completion scheduled for 30 June 2023, as assumed</li></ul>

Cost of capital tweaks could have been worse: We had expected the Commerce Commission (ComCom) to adjust regulatory cost of capital (WACC) parameters to help offset the rapid increase in interest rates over the past three years.VCT misses out on removing asset indexation, results in funding challenges, particularly given big increase in future capexMetering sale unconditional, completion scheduled for 30 June 2023, as assumed

<ul><li>Good operating result undone by lift in Corporate/other opex and higher interest costs</li><li>Outlook softer than expected, with storm damage repairs only partly explaining the difference</li><li>Partial dividend imputation remains for now — dividend policy under review</li></ul>

Good operating result undone by lift in Corporate/other opex and higher interest costsOutlook softer than expected, with storm damage repairs only partly explaining the differencePartial dividend imputation remains for now — dividend policy under review

Vector: Outlook Yellow Stickered — 1H23 Result

New Zealand

Vector Limited is an energy infrastructure company in New Zealand that provides electricity and gas transmission and distribution along with metering.  The Company is also a wholesaler of LPG and natural gas.  Vector also delivers broadband voice and data communications in the Auckland and Wellington regions.

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Vector Ltd (VCT NZ)

Vector - Meting Out a Special Dividend — FY23 Result

Vector's (VCT) FY23 result, its last while owning 100% of the Metering business, was another solid performance with the main surprise coming from...

Forsyth Barr

Equity Strategy - WACC Review; a Lower Rfr and Adding C&ESG

For the first time in three years we are moving our WACC assumptions down. This is driven by a modestly lower (-25 bps) interpolated 10-year...

Forsyth Barr

Regulated Companies - The Relevance of RAB Multiples

RAB multiples (enterprise value divided by regulatory asset base) provide a useful means of valuing and sense checking valuations for regulated...

Forsyth Barr

Vector: Capex Funding No Easier

The Commerce Commission's draft input methodology decision was a slight positive for Vector (VCT), but it missed out on the big change it was...

Forsyth Barr

Vector: Outlook Yellow Stickered — 1H23 Result

Vector (VCT) delivered a good operational 1H23 result, but that was offset by higher Corporate/other costs, higher interest costs and soft first...

Forsyth Barr

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