New Zealand Professional Investment Services Firm

Forsyth Barr

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.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Air New Zealand (AIR)</h2>
<h3>Guidance Reinstatement</h3>
<p>Air New Zealand (AIR) has reinstated FY20 earnings guidance having suspended it at the outset of COVID-19 on 9 March 2020. Updated guidance is for an underlying PBT loss of up to - NZ$120m. This is a materially better outcome than our forecast of -NZ$316m.</p>
<p>In addition to the underlying guidance there are a number of significant items that will impact the FY20 reported result and importantly the net asset value (NAV) at balance sheet date. With the exception of a ~NZ$70m non-cash gain from the revaluation of unhedged foreign currency debt, these have already been disclosed and incorporated into our modelling.</p>
<p>The additional non-cash gain and better than anticipated PBT loss benefit our assessment of NAV, however, the uplift is partially mitigated by the tax consequences of the one-off items. Nonetheless we now expect NAV to increase above our existing estimate of NZ$0.95 at June 2020 but still remain materially below the current share price. &nbsp;</p>
<p>Our target price of NZ$0.70 is based on NAV as at June 2021. We have an UNDERPERFORM rating on AIR.</p>
<p><strong>Andy Bowley&nbsp;</strong><br>Head of Research<br>Forsyth Barr Limited</p>
<p>M: +64 21 338 941 |P: +64 4 495 8246 | TF: 0800 367 227&nbsp;<br>Level 22, NTT Tower, 157 Lambton Quay, Wellington</p>

Air New Zealand (AIR)
Guidance Reinstatement
Air New Zealand (AIR) has reinstated FY20 earnings guidance having suspended it at the outset of COVID-19 on 9 March 2020. Updated guidance is for an underlying PBT loss of up to - NZ$120m. This is a materially better outcome than our forecast of -NZ$316m.
In addition to the underlying guidance there are a number of significant items that will impact the FY20 reported result and importantly the net asset value (NAV) at balance sheet date. With the exception of a ~NZ$70m non-cash gain from the revaluation of unhedged foreign currency debt, these have already been disclosed and incorporated into our modelling.
The additional non-cash gain and better than anticipated PBT loss benefit our assessment of NAV, however, the uplift is partially mitigated by the tax consequences of the one-off items. Nonetheless we now expect NAV to increase above our existing estimate of NZ$0.95 at June 2020 but still remain materially below the current share price. &nbsp;
Our target price of NZ$0.70 is based on NAV as at June 2021. We have an UNDERPERFORM rating on AIR.
Andy Bowley&nbsp; Head of Research Forsyth Barr Limited
M: +64 21 338 941 |P: +64 4 495 8246 | TF: 0800 367 227&nbsp; Level 22, NTT Tower, 157 Lambton Quay, Wellington

Air New Zealand (AIR): Guidance Reinstatement