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>Auckland Airport<br>1H22 Preview&nbsp;— Pax Awaiting Take-off</h2>
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<p><strong>NEUTRAL</strong></p>
<p>Auckland Airport (AIA) is due to report a subdued 1H22 result on 24 February 2022, with further underlying losses likely as a result of COVID-19 restrictions. Border closures, notwithstanding a few weeks of the trans-Tasman bubble, and extended domestic restrictions during the period will have weighed on both domestic and international passenger (pax) numbers. While the outlook appears more promising as border restrictions ease, we anticipate AIA being at risk of an EBITDA interest cover (&gt;2.0) covenant breach as at June 2022. However, even if a breach eventuates we expect little recourse given a supporting banking group, and the nature of the potential breach (government policy vs company&nbsp;driven).&nbsp;</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/257/434/original/image_60607048821644973555702.png?1644973556" class="editor-image img-responsive" data-smartkarma-image-id="257434"></figure>
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<h3>What's changed?&nbsp;</h3>
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<li><strong>Aeronautical charges</strong>:&nbsp;AIA outlined last month that it will defer its aeronautical price&nbsp;reset for one year with FY23 prices frozen at FY22 levels, albeit subject to any changes to the additional charge for international and transit pax (effective 1 October 2021) of&nbsp;NZ$2.00/&nbsp;pax, levied to recover additional costs incurred in segregated pax in light of COVID-19 measures. &nbsp;</li>
<li><strong>Consumer income</strong>:&nbsp;With most retailers closed for most&nbsp;of the period and MAGS relief continuing, we expect&nbsp;retail income to be flat at just ~NZ$7m in 1H22. More importantly, we await an update on the duty free re-tender process.&nbsp;</li>
<li><strong>Property</strong>:&nbsp;The standout performer for AIA with a further lift in rental income due to the competed&nbsp;Foodstuffs distribution centre.&nbsp;</li>
<li><strong>Opex</strong>:&nbsp;FY22&nbsp;guidance of NZ$160m–NZ$175m is likely to be lowered in light of limited international traffic during 1H22 though&nbsp;opex&nbsp;should increase through 2H22 as international pax builds.&nbsp;&nbsp;</li>
<li><strong>Capex</strong>: Ongoing aeronautical and investment property projects contribute to full year guidance of NZ$250m–NZ$300m.&nbsp;</li>
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<h3>Result conference call</h3>
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<p>Management, including new CEO Carrie ​​​​​​​Hurihanganui,&nbsp;will hold a result conference call at 11am on 24 February 2022. Pre-register at:&nbsp;<a href="https://apac.directeventreg.com/registration/event/2275765" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://apac.directeventreg.com/registration/event/2275765&amp;source=gmail&amp;ust=1645059532890000&amp;usg=AOvVaw0A8UtZvTgvqVlLHsPP_67K" rel="noopener">https://apac.directeventreg.<wbr>com/registration/event/2275765</a><wbr>. Call&nbsp;webcast&nbsp;link:&nbsp;<a href="https://edge.media-server.com/mmc/p/g8f7ifqw" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://edge.media-server.com/mmc/p/g8f7ifqw&amp;source=gmail&amp;ust=1645059532890000&amp;usg=AOvVaw0-5uWNsBkeQ4lMx2HQ8oZK" rel="noopener">https://edge.media-server.com/<wbr>mmc/p/g8f7ifqw</a></p>
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Auckland Airport 1H22 Preview&nbsp;— Pax Awaiting Take-off

NEUTRAL
Auckland Airport (AIA) is due to report a subdued 1H22 result on 24 February 2022, with further underlying losses likely as a result of COVID-19 restrictions. Border closures, notwithstanding a few weeks of the trans-Tasman bubble, and extended domestic restrictions during the period will have weighed on both domestic and international passenger (pax) numbers. While the outlook appears more promising as border restrictions ease, we anticipate AIA being at risk of an EBITDA interest cover (&gt;2.0) covenant breach as at June 2022. However, even if a breach eventuates we expect little recourse given a supporting banking group, and the nature of the potential breach (government policy vs company&nbsp;driven).&nbsp;


What's changed?&nbsp;



Aeronautical charges:&nbsp;AIA outlined last month that it will defer its aeronautical price&nbsp;reset for one year with FY23 prices frozen at FY22 levels, albeit subject to any changes to the additional charge for international and transit pax (effective 1 October 2021) of&nbsp;NZ$2.00/&nbsp;pax, levied to recover additional costs incurred in segregated pax in light of COVID-19 measures. &nbsp;
Consumer income:&nbsp;With most retailers closed for most&nbsp;of the period and MAGS relief continuing, we expect&nbsp;retail income to be flat at just ~NZ$7m in 1H22. More importantly, we await an update on the duty free re-tender process.&nbsp;
Property:&nbsp;The standout performer for AIA with a further lift in rental income due to the competed&nbsp;Foodstuffs distribution centre.&nbsp;
Opex:&nbsp;FY22&nbsp;guidance of NZ$160m–NZ$175m is likely to be lowered in light of limited international traffic during 1H22 though&nbsp;opex&nbsp;should increase through 2H22 as international pax builds.&nbsp;&nbsp;
Capex: Ongoing aeronautical and investment property projects contribute to full year guidance of NZ$250m–NZ$300m.&nbsp;



Result conference call


Management, including new CEO Carrie ​​​​​​​Hurihanganui,&nbsp;will hold a result conference call at 11am on 24 February 2022. Pre-register at:&nbsp;https://apac.directeventreg.com/registration/event/2275765. Call&nbsp;webcast&nbsp;link:&nbsp;https://edge.media-server.com/mmc/p/g8f7ifqw


Auckland Airport: 1H22 Preview — Pax Awaiting Take-Off

Auckland Intl Airport

Auckland Airport: 1H22 Preview — Pax Awaiting Take-Off