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>
New Zealand
<ul>
<li>Strong housing demand (REINZ, Jan.): House sales down -2.8% mom, +3.2% yoy (previous +1.6% mom, +16.3% yoy). Days to sell in Auckland -8 yoy to 43 (vs. long-term average 35), ex-Auckland -4 to 42 (vs. long-term average 42). House prices rising: +0.3% mom, +7.0% yoy (previous +0.5% mom, +6.6% yoy), with Auckland +4% yoy and ex-Auckland +9% yoy.</li>
<li>Real rental inflation reflects limited inventory (Jan.): 3m rolling average rents – Auckland +2.0%, Wellington +3.9%, rest of North Island +5.4%, Canterbury +2.1% and rest of South Island +5.0%.</li>
<li>Net migration falling, but still at a stimulatory level (12 months to Dec.): +43.8k -11.4% yoy (previous +45.0k).</li>
<li>Opinion that the convention centre fire could lead to legal action and significant cost escalation for Fletcher Construction: <a href="https://www.nbr.co.nz/opinion/international-convention-centre-fletcher-s-train-wreck?utm_medium=email&amp;utm_source=Heads%20Up" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.nbr.co.nz/opinion/international-convention-centre-fletcher-s-train-wreck?utm_medium%3Demail%26utm_source%3DHeads%2520Up&amp;source=gmail&amp;ust=1582262394588000&amp;usg=AFQjCNEhq43N4BS-8NvpLxF5QVogtuTNxQ" rel="noopener">International convention centre – Fletcher’s train wreck?</a> (behind a paywall)</li>
<li>Residential construction and the housing market are “going gangbusters”: One concern is that Coronavirus related fears will cause "interruptions to the supply of steel from China, (which) if prolonged, could delay commercial and infrastructure projects.” <a href="https://push.bigtincan.com.au/downloads/19c69dbfce41f994a4403ab9814aa075586332d54674c38e99766ce294f6270c" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://push.bigtincan.com.au/downloads/19c69dbfce41f994a4403ab9814aa075586332d54674c38e99766ce294f6270c&amp;source=gmail&amp;ust=1582262394588000&amp;usg=AFQjCNFdYr7QIoDO31_xQHiCtLGv6vJKuA" rel="noopener">ANZecdotes</a></li>
</ul>
Australia
<ul>
<li>Weak Australia for GWA (1H20): Like-for-like sales down -11.5% (AU -15%, NZ +1%, international +9%) impacted by “the decline in residential new build and renovation construction activity in Australia” and “retailer de-stocking”. GWA expects conditions “to remain challenging in the short term” but is optimistic about an “improvement in residential market conditions in early FY21.”</li>
<li>Mike Kane suggests only superman can rescue Boral from the mire he’s leaving it in (or that’s a least how we interpreted it): <a href="https://www.news.com.au/finance/work/leaders/boral-ceos-parting-shot-after-resigning-in-the-wake-of-accounting-fraud-scandal/news-story/ffc6d66b79faeeaf611241c6e603c8c0" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.news.com.au/finance/work/leaders/boral-ceos-parting-shot-after-resigning-in-the-wake-of-accounting-fraud-scandal/news-story/ffc6d66b79faeeaf611241c6e603c8c0&amp;source=gmail&amp;ust=1582262394588000&amp;usg=AFQjCNHuDf6RLUcBEXG4Rgl6nfl7WHsIOA" rel="noopener">Boral CEO’s parting shot after resigning in the wake of accounting fraud scandal</a></li>
</ul>
International
<ul>
<li>US: Strongest housing permits since March 2007 (Jan.): Permits +9.2% mom, +17.9% yoy (previous -3.7% mom, +6.0% yoy), with single-family dwellings up +20% yoy and volatile multi-family +14%. Starts -3.6% mom, +21.4% yoy (previous +17.7% mom, +42.4% yoy) on single-family +5% yoy and multi-family +71%.</li>
<li>US: Homebuilders confidence (understandably) remains high (Feb.): 74 (previous 75; positive &gt;50&gt; negative).</li>
<li>UK: Mixed new construction orders (4Q19): Residential -8.5% qoq, -3.7% yoy (previous +8.0% qoq, +9.3% yoy). Non-residential +11.2% qoq, +1.2% yoy (previous -3.8% qoq, -13.4% yoy).</li>
</ul>
Chart of the week: The US housing market has responded sharply to interest rate cuts early last year. January’s housing permits were the highest since early 2007. &nbsp;
US housing permits vs. homebuilder confidence
<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:1659031767334566729&amp;th=1706109a3b10bb49&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ8RDE-bHkPT3tiFxIy4pptita7AcZJLv9aaJMKTa1WFoikZhwk9--zhN8RrlP2_P6udlzmkY8CUYLI3E2LmPAKjuwPOqul4tWKphRB0bALGpGkyJUZNHWM1JCA&amp;disp=emb" width="450" height="340" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Source: Bloomberg, Forsyth Barr analysis
Matt Henry &nbsp;CFA Head of Wealth Management Research Forsyth Barr Limited
P: +64 9 368 0115 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Building weekly
New Zealand

Strong housing demand (REINZ, Jan.): House sales down -2.8% mom, +3.2% yoy (previous +1.6% mom, +16.3% yoy). Days to sell in Auckland -8 yoy to 43 (vs. long-term average 35), ex-Auckland -4 to 42 (vs. long-term average 42). House prices rising: +0.3% mom, +7.0% yoy (previous +0.5% mom, +6.6% yoy), with Auckland +4% yoy and ex-Auckland +9% yoy.
Real rental inflation reflects limited inventory (Jan.): 3m rolling average rents – Auckland +2.0%, Wellington +3.9%, rest of North Island +5.4%, Canterbury +2.1% and rest of South Island +5.0%.
Net migration falling, but still at a stimulatory level (12 months to Dec.): +43.8k -11.4% yoy (previous +45.0k).
Opinion that the convention centre fire could lead to legal action and significant cost escalation for Fletcher Construction: International convention centre – Fletcher’s train wreck? (behind a paywall)
Residential construction and the housing market are “going gangbusters”: One concern is that Coronavirus related fears will cause "interruptions to the supply of steel from China, (which) if prolonged, could delay commercial and infrastructure projects.” ANZecdotes

Australia

Weak Australia for GWA (1H20): Like-for-like sales down -11.5% (AU -15%, NZ +1%, international +9%) impacted by “the decline in residential new build and renovation construction activity in Australia” and “retailer de-stocking”. GWA expects conditions “to remain challenging in the short term” but is optimistic about an “improvement in residential market conditions in early FY21.”
Mike Kane suggests only superman can rescue Boral from the mire he’s leaving it in (or that’s a least how we interpreted it): Boral CEO’s parting shot after resigning in the wake of accounting fraud scandal

International

US: Strongest housing permits since March 2007 (Jan.): Permits +9.2% mom, +17.9% yoy (previous -3.7% mom, +6.0% yoy), with single-family dwellings up +20% yoy and volatile multi-family +14%. Starts -3.6% mom, +21.4% yoy (previous +17.7% mom, +42.4% yoy) on single-family +5% yoy and multi-family +71%.
US: Homebuilders confidence (understandably) remains high (Feb.): 74 (previous 75; positive &gt;50&gt; negative).
UK: Mixed new construction orders (4Q19): Residential -8.5% qoq, -3.7% yoy (previous +8.0% qoq, +9.3% yoy). Non-residential +11.2% qoq, +1.2% yoy (previous -3.8% qoq, -13.4% yoy).

Chart of the week: The US housing market has responded sharply to interest rate cuts early last year. January’s housing permits were the highest since early 2007. &nbsp;
US housing permits vs. homebuilder confidence

Source: Bloomberg, Forsyth Barr analysis
Matt Henry &nbsp;CFA Head of Wealth Management Research Forsyth Barr Limited
P: +64 9 368 0115 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Fletcher Building

Building Weekly