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>Asset Plus</h2>
Dividend Update and Whangarei Land Acquisition
Asset Plus (APL) has today (1) reinstated dividends with a 1Q21 distribution of 0.45cps and (2) acquired a piece of bare industrial land in Kamo, Whangarei which further adds to its development pipeline. Given APL’s considerable and time critical capital constraints (as outlined in the attached note) these announcements may suggest that APL’s manager (Augusta, AUG) and Board are confident in resolving its funding dilemma shortly. While this would be encouraging, we expect concerns of equity raise dilution and other portfolio risks, including a significant Auckland office lease expiry (40% of rent), will continue to overhang APL in the near term. We retain our UNDERPERFORM rating.
Key points from today’s AGM
<ul>
<li>Dividend resumed – now on a 5.1% cash yield: APL has announced that it will pay a 1Q dividend of 0.45cps (half the level it was pre COVID), and expects to maintain this level. Annualised this is 1.8cps (ahead of our FY21 forecast of 1.15cps) placing it on a 5.1% cash yield.</li>
<li>Acquisition of land for development: APL has acquired 38,000sqm of bare land at Kamo, Whangarei for NZ$2.125m (or $56/sqm), which settles on 30 July 2020. This represents a development opportunity intended to be held as investment property on completion.</li>
<li>Abatements tracking better than our expectations: Abatements in 1Q21 “has impacted operating earnings by $0.59m ($0.42m after-tax), equivalent to approximately 4% of the current annualised gross rental income.” This appears to be better than our expectation of 12% of FY21 rent, given most of the abatements “are now agreed and all key tenants are back on full rent”.</li>
<li>Munroe Lane development still intended: APL is still considering “all pathways and options to fulfil the funding condition” related to Munroe Lane. In our view, a capital raise is a potential mechanism for solving APLs capital dilemma.</li>
</ul>
APL’s acquisition: 38,000 sqm of industrial land in Kamo, Whangarei
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.0.1&amp;permmsgid=msg-f:1673430805687447821&amp;th=173938739932310d&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ-JAOQU_xZL-rVc_cB9OsOH9pbCcqRGuk-0fkTzErTbvbSOXOyeGXY_bZvA1Q6Pcl9YP6orIfQdnLjTJA8qYBO9coWIBihGMkKE7_WpgZFA81NsoO8tmq_dD04&amp;disp=emb" width="315" height="264" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Source: Company presentation
Rohan Koreman-Smit&nbsp; Senior Analyst, Equities <a href="https://www.forsythbarr.co.nz/" target="_blank" rel="noopener">Forsyth Barr Limited</a>
P: +64 9 368 0085 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Asset Plus
Dividend Update and Whangarei Land Acquisition
Asset Plus (APL) has today (1) reinstated dividends with a 1Q21 distribution of 0.45cps and (2) acquired a piece of bare industrial land in Kamo, Whangarei which further adds to its development pipeline. Given APL’s considerable and time critical capital constraints (as outlined in the attached note) these announcements may suggest that APL’s manager (Augusta, AUG) and Board are confident in resolving its funding dilemma shortly. While this would be encouraging, we expect concerns of equity raise dilution and other portfolio risks, including a significant Auckland office lease expiry (40% of rent), will continue to overhang APL in the near term. We retain our UNDERPERFORM rating.
Key points from today’s AGM

Dividend resumed – now on a 5.1% cash yield: APL has announced that it will pay a 1Q dividend of 0.45cps (half the level it was pre COVID), and expects to maintain this level. Annualised this is 1.8cps (ahead of our FY21 forecast of 1.15cps) placing it on a 5.1% cash yield.
Acquisition of land for development: APL has acquired 38,000sqm of bare land at Kamo, Whangarei for NZ$2.125m (or $56/sqm), which settles on 30 July 2020. This represents a development opportunity intended to be held as investment property on completion.
Abatements tracking better than our expectations: Abatements in 1Q21 “has impacted operating earnings by $0.59m ($0.42m after-tax), equivalent to approximately 4% of the current annualised gross rental income.” This appears to be better than our expectation of 12% of FY21 rent, given most of the abatements “are now agreed and all key tenants are back on full rent”.
Munroe Lane development still intended: APL is still considering “all pathways and options to fulfil the funding condition” related to Munroe Lane. In our view, a capital raise is a potential mechanism for solving APLs capital dilemma.

APL’s acquisition: 38,000 sqm of industrial land in Kamo, Whangarei

Source: Company presentation
Rohan Koreman-Smit&nbsp; Senior Analyst, Equities Forsyth Barr Limited
P: +64 9 368 0085 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Asset Plus: Dividend Update and Whangarei Land Acquisition