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).

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Asset Plus<br>35 Graham&nbsp;St Gone</h2>
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<p><strong>NEUTRAL</strong></p>
<p>Asset Plus (APL) has announced that 35 Graham St has been sold. The sale (1) increases confidence in current NTA, (2) removes leasing/redevelopment risks associated with the asset, and (3) significantly reduces gearing. With development land in&nbsp;Kamo&nbsp;also being marketed for sale, the remaining two assets will have a gross book value of c.NZ$190m once the Munroe Lane development is complete. While there remains a significant gap between the share price and NTA we&nbsp;continue to see the risk/reward as balanced. We retain our NEUTRAL rating given the lack of progress on its strategic objectives of (1) increase scale, (2) sustainable growth, and (3) provide a yield.&nbsp;​​​​​​​</p>
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<h3>What's changed?&nbsp;</h3>
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<li><strong>Earnings</strong>:&nbsp;FY22E,&nbsp;FY23E and FY24E AFFO +1%, -74% and -38% respectively</li>
<li><strong>Target price</strong>:&nbsp;+3cps to NZ$0.36 reflecting a lift in the value of Graham St in our NAV</li>
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<h3>Graham St sale removes an overhang</h3>
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<p>The sale price of NZ$65m represents a c. +4% premium to current book value, and a +12% premium to the NZ$58m 2019 purchase price. Given the relative size of the transaction to APL's portfolio shareholder approval is required with a vote expected late May/early June. Similar to the Eastgate divestment there will be a long deferred settlement period with settlement expected 1 December 2023. The acquirer has the right to extend settlement until 1 December 2024, however, this requires a further 10% deposit and raises the purchase price to NZ$68m.</p>
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<h3>Where to from here?</h3>
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<p>Eastgate's&nbsp;imminent settlement, the sale of Graham St,&nbsp;and the&nbsp;Kamo&nbsp;land currently being marketed for sale has shrunk&nbsp;APL's&nbsp;portfolio&nbsp;and removed value add options from its portfolio. On our estimates Munroe Land and Stoddard Rd could&nbsp;deliver APL shareholders a sustainable annual dividend of 1.25cps in FY25 with low balance sheet gearing (c.10%). We estimate APL have balance sheet capacity for NZ$75m of acquisitions which could lift AFFO 15–20% depending on the yield spread to debt costs. We also expect NTA to lift to 50cps on the completion of Munroe Lane and the sale of Graham St.&nbsp;</p>
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<h3>Investors have to wait</h3>
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<p>Investors have to look through FY22–23E to FY24–25E with completion of Munroe Lane and settlement of Graham St before distributions return and growth options can be&nbsp;delineated. We expect&nbsp;APL's&nbsp;discount to NTA to persist until&nbsp;the market has confidence in leasing up of the remainder of Munroe Lane and management can outline a path to growing portfolio value and distributions.&nbsp;</p>
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Asset Plus 35 Graham&nbsp;St Gone

NEUTRAL
Asset Plus (APL) has announced that 35 Graham St has been sold. The sale (1) increases confidence in current NTA, (2) removes leasing/redevelopment risks associated with the asset, and (3) significantly reduces gearing. With development land in&nbsp;Kamo&nbsp;also being marketed for sale, the remaining two assets will have a gross book value of c.NZ$190m once the Munroe Lane development is complete. While there remains a significant gap between the share price and NTA we&nbsp;continue to see the risk/reward as balanced. We retain our NEUTRAL rating given the lack of progress on its strategic objectives of (1) increase scale, (2) sustainable growth, and (3) provide a yield.&nbsp;​​​​​​​


What's changed?&nbsp;



Earnings:&nbsp;FY22E,&nbsp;FY23E and FY24E AFFO +1%, -74% and -38% respectively
Target price:&nbsp;+3cps to NZ$0.36 reflecting a lift in the value of Graham St in our NAV



Graham St sale removes an overhang


The sale price of NZ$65m represents a c. +4% premium to current book value, and a +12% premium to the NZ$58m 2019 purchase price. Given the relative size of the transaction to APL's portfolio shareholder approval is required with a vote expected late May/early June. Similar to the Eastgate divestment there will be a long deferred settlement period with settlement expected 1 December 2023. The acquirer has the right to extend settlement until 1 December 2024, however, this requires a further 10% deposit and raises the purchase price to NZ$68m.


Where to from here?


Eastgate's&nbsp;imminent settlement, the sale of Graham St,&nbsp;and the&nbsp;Kamo&nbsp;land currently being marketed for sale has shrunk&nbsp;APL's&nbsp;portfolio&nbsp;and removed value add options from its portfolio. On our estimates Munroe Land and Stoddard Rd could&nbsp;deliver APL shareholders a sustainable annual dividend of 1.25cps in FY25 with low balance sheet gearing (c.10%). We estimate APL have balance sheet capacity for NZ$75m of acquisitions which could lift AFFO 15–20% depending on the yield spread to debt costs. We also expect NTA to lift to 50cps on the completion of Munroe Lane and the sale of Graham St.&nbsp;


Investors have to wait


Investors have to look through FY22–23E to FY24–25E with completion of Munroe Lane and settlement of Graham St before distributions return and growth options can be&nbsp;delineated. We expect&nbsp;APL's&nbsp;discount to NTA to persist until&nbsp;the market has confidence in leasing up of the remainder of Munroe Lane and management can outline a path to growing portfolio value and distributions.&nbsp;


Asset Plus

Asset Plus: 35 Graham St Gone