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>Building weekly</h2>
<h3>New Zealand</h3>
<ul>
<li>Residential consents remain robust (Jul.): -4.5% mom, +2.5% yoy (previous +0.7% mom, +8.4% yoy) with rolling 12m total up +6% to 37.6k. Non-residential remains challenging: value consented down -9.9% yoy with sqm -34.0% taking the past 12 months to -11% and -18% respectively.</li>
<li>Level 3 can’t hold back Auckland housing (Barfoot &amp; Thompson; Aug.): Auckland sales up +41% yoy, average/median prices resilient +7.0%/+9.8% yoy.</li>
<li>Housing inventory tightens further (<a href="http://realestate.co.nz/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://realestate.co.nz&amp;source=gmail&amp;ust=1599195648688000&amp;usg=AFQjCNEo02VtdcbkVm4j3Zg8mLTO2YzFeg" rel="noopener">realestate.co.nz</a>, Aug.): Auckland property inventory -7% yoy on total new listings +20%. Ex-Auckland inventory -17% yoy on new listings +14%.</li>
<li>Second lockdown hampers commercial construction confidence (ANZ Business Outlook, Aug.): Residential –17.2 (previous -29.0), Commercial -32.0 (previous 0.0). Own activity outlook of -12.1 suggests a slight fall in construction activity.</li>
<li>Economists have revised their housing market forecasts as low interest rates fuel demand: “There are a few things in play here which point towards a strong possibility that the weakness in the housing market may have been and gone and the general track for prices from here on out is more likely to be upward than downward.” <a href="https://www.oneroof.co.nz/news/38364" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.oneroof.co.nz/news/38364&amp;source=gmail&amp;ust=1599195648688000&amp;usg=AFQjCNELUQd8NV6m4i0AskvW7zL4vcf03w" rel="noopener">House prices tipped to rise ‘at a completely unforecastable pace’</a></li>
</ul>
<h3>Australia</h3>
<ul>
<li>Residential approvals tick up (Jul.): +12.0% mom, +6.3% yoy (previous -4.2% mom, -14.8% yoy) including multi-tenanted +8.4% yoy and detached dwellings +5.3%. Non-residential in the red: -19.8% mom, -15.7% yoy. Past 12 months +10% yoy</li>
<li>House prices grind lower for fourth consecutive month (CoreLogic-RPData, capital cities, Aug.): -0.5% mom, +6.3% yoy (previous -0.8% mom, +8.0% yoy).</li>
<li>Construction activity still contracting (Performance of Construction Index, Jul.): 37.9 (previous 42.7; contraction &lt;50&lt; expansion) with apartments 22.8 (previous 33.9), houses 37.4 (previous 47.0), commercial 32.4 (previous 42.0) and engineering 27.0 (previous 45.5).</li>
<li>Resi construction activity soft, non-resi holding up (preliminary work done, 2Q20): Residential -5.5% qoq, -12.1% yoy (previous flat qoq, -10.2% yoy). Non-residential -1.5% qoq, +6.2% yoy (previous +2.0% qoq, +2.5% yoy). Engineering +3.8% qoq, 2.2% yoy (previous 0.5% qoq, -2.9% yoy).</li>
<li>Bush fires, floods, and a pandemic add up to a challenging year for Boral (FY20): &nbsp;AU EBITDA -25% yoy (2H -44%) with concrete volumes -10%, aggregates -11%, and cement -6%. North America EBITDA -28% yoy (2H -42%) with Fly Ash volumes -2%, roofing -6%, and stone -11%. USG Boral EBITDA -25% yoy (2H -41%) with Australia and NZ revenue -9% and Asia -8%. Current trading remains soft: Australian concrete volumes -12% yoy (including Melbourne metro -20%) and plasterboard -6% in July.</li>
</ul>
<h3>International</h3>
<ul>
<li>US: Construction activity ticking along (Jul.): Residential +2.1% mom, +1.0% yoy (previous -0.6% mom, flat yoy), non-residential -1.2% mom, -0.8% yoy (previous -0.4% mom, +1.1 yoy).</li>
<li>UK: Barrett seeing pickup in housing demand (FY20): NPAT -46% yoy due to June quarter disruption to sales and build rates. Forward sales strong volume/value +20%/+22% yoy to 15,660/ £3,706.5m.</li>
</ul>
Chart of the week: Auckland housing market shrugs off second lockdown
Auckland residential sales and listings
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.2&amp;permmsgid=msg-f:1676787559874969966&amp;th=17452566d624416e&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ9NfBmKbeglc7w1QiCDDXE0v0Zjxcc_oWl6eLEZmikP3icMDUVcJNECZaz_BiczbAkU2gpVVSQgJUYmY1psWgXC7equ3uBqg2YM9_SabtiqZ8aTwAHerxvMEcs&amp;disp=emb" width="457" height="340" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Source:&nbsp;Barfoot &amp; Thompson,&nbsp;Forsyth Barr analysis
Rohan Koreman-Smit Senior Analyst, Equities
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.1&amp;permmsgid=msg-f:1676787559874969966&amp;th=17452566d624416e&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ--TDw4gLO2F8-J7zFUwQkemDbNB7qONAoqnAubqeeEqtYvazy0wutzQdNlflP_9WlK9M5B6mgKNSvToYdeV3SNO9SXJ9kNU1ZbfxsvA1CLb3Cr2OunGxpy6Po&amp;disp=emb" class="editor-image img-responsive"></figure>
P:+64 9 368 0085 |TF:0800 367 227 Level 23, Lumley Centre, 88 Shortland Street, Auckland

Building weekly
New Zealand

Residential consents remain robust (Jul.): -4.5% mom, +2.5% yoy (previous +0.7% mom, +8.4% yoy) with rolling 12m total up +6% to 37.6k. Non-residential remains challenging: value consented down -9.9% yoy with sqm -34.0% taking the past 12 months to -11% and -18% respectively.
Level 3 can’t hold back Auckland housing (Barfoot &amp; Thompson; Aug.): Auckland sales up +41% yoy, average/median prices resilient +7.0%/+9.8% yoy.
Housing inventory tightens further (realestate.co.nz, Aug.): Auckland property inventory -7% yoy on total new listings +20%. Ex-Auckland inventory -17% yoy on new listings +14%.
Second lockdown hampers commercial construction confidence (ANZ Business Outlook, Aug.): Residential –17.2 (previous -29.0), Commercial -32.0 (previous 0.0). Own activity outlook of -12.1 suggests a slight fall in construction activity.
Economists have revised their housing market forecasts as low interest rates fuel demand: “There are a few things in play here which point towards a strong possibility that the weakness in the housing market may have been and gone and the general track for prices from here on out is more likely to be upward than downward.” House prices tipped to rise ‘at a completely unforecastable pace’

Australia

Residential approvals tick up (Jul.): +12.0% mom, +6.3% yoy (previous -4.2% mom, -14.8% yoy) including multi-tenanted +8.4% yoy and detached dwellings +5.3%. Non-residential in the red: -19.8% mom, -15.7% yoy. Past 12 months +10% yoy
House prices grind lower for fourth consecutive month (CoreLogic-RPData, capital cities, Aug.): -0.5% mom, +6.3% yoy (previous -0.8% mom, +8.0% yoy).
Construction activity still contracting (Performance of Construction Index, Jul.): 37.9 (previous 42.7; contraction &lt;50&lt; expansion) with apartments 22.8 (previous 33.9), houses 37.4 (previous 47.0), commercial 32.4 (previous 42.0) and engineering 27.0 (previous 45.5).
Resi construction activity soft, non-resi holding up (preliminary work done, 2Q20): Residential -5.5% qoq, -12.1% yoy (previous flat qoq, -10.2% yoy). Non-residential -1.5% qoq, +6.2% yoy (previous +2.0% qoq, +2.5% yoy). Engineering +3.8% qoq, 2.2% yoy (previous 0.5% qoq, -2.9% yoy).
Bush fires, floods, and a pandemic add up to a challenging year for Boral (FY20): &nbsp;AU EBITDA -25% yoy (2H -44%) with concrete volumes -10%, aggregates -11%, and cement -6%. North America EBITDA -28% yoy (2H -42%) with Fly Ash volumes -2%, roofing -6%, and stone -11%. USG Boral EBITDA -25% yoy (2H -41%) with Australia and NZ revenue -9% and Asia -8%. Current trading remains soft: Australian concrete volumes -12% yoy (including Melbourne metro -20%) and plasterboard -6% in July.

International

US: Construction activity ticking along (Jul.): Residential +2.1% mom, +1.0% yoy (previous -0.6% mom, flat yoy), non-residential -1.2% mom, -0.8% yoy (previous -0.4% mom, +1.1 yoy).
UK: Barrett seeing pickup in housing demand (FY20): NPAT -46% yoy due to June quarter disruption to sales and build rates. Forward sales strong volume/value +20%/+22% yoy to 15,660/ £3,706.5m.

Chart of the week: Auckland housing market shrugs off second lockdown
Auckland residential sales and listings

Source:&nbsp;Barfoot &amp; Thompson,&nbsp;Forsyth Barr analysis
Rohan Koreman-Smit Senior Analyst, Equities

P:+64 9 368 0085 |TF:0800 367 227 Level 23, Lumley Centre, 88 Shortland Street, Auckland

Boral Ltd

Building Weekly