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>First week of lockdown impacts construction activity (1Q20): Residential volumes -5.8% qoq, -5.9% yoy (previous +1.3% qoq, +4.1% yoy). Non-residential -5.8% qoq, -11.2% yoy (previous -3.8% qoq, +3.0% yoy).</li>
<li>Fletchers in the headlines:</li>
</ul>
-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fletchers gains covenant flexibility:&nbsp;FBU has announced that its banking syndicate and USPP will relax&nbsp;covenants:&nbsp;total interest cover (to 1.5x from 2.0x) and senior interest cover (2.25x from 3.0x) from June 2020 to December 2021 if required. FBU has agreed it will not pay a dividend until it returns to normal covenant levels.
-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rocla still on the blocks:&nbsp;The suggested A$200m sale price would be a fantastic outcome for a business that makes single digit millions EBIT.&nbsp;<a href="https://www.theaustralian.com.au/business/dataroom/fletcher-buildings-rocla-concrete-pipes-sale-rolling-on/news-story/3cd8e8d805b3c4418893611b81a992a3" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.theaustralian.com.au/business/dataroom/fletcher-buildings-rocla-concrete-pipes-sale-rolling-on/news-story/3cd8e8d805b3c4418893611b81a992a3&amp;source=gmail&amp;ust=1592007289335000&amp;usg=AFQjCNF65WGV-ZN1ZjA2ZMREHP6sNsQFdA" rel="noopener">Fletcher Building’s Rocla concrete pipes sale rolling on (behind paywall)</a>
-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Taking a look at Wattyl?&nbsp;We would be surprised if FBU is looking at another tertiary business in Australia.&nbsp;<a href="https://www.afr.com/street-talk/us-giant-mulls-options-for-aussie-paint-business-wattyl-20200611-p551i0" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.afr.com/street-talk/us-giant-mulls-options-for-aussie-paint-business-wattyl-20200611-p551i0&amp;source=gmail&amp;ust=1592007289335000&amp;usg=AFQjCNFFvoNtf-CuKcCpahFgO3_XrPYy-g" rel="noopener">US giant mulls options for Aussie paint business Wattyl (behind paywall)</a>
-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost cutting begins with Placemakers closures in Christchurch and Helensville:&nbsp;<a href="https://www.stuff.co.nz/business/121791222/fletcherowned-placemakers-closes-store-and-depot" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.stuff.co.nz/business/121791222/fletcherowned-placemakers-closes-store-and-depot&amp;source=gmail&amp;ust=1592007289335000&amp;usg=AFQjCNEvLbqUGi3BwgtK0IVY2vM9XhJY9Q" rel="noopener">Fletcher-owned Placemakers closes store and depot</a>
<ul>
<li>“Two years late and $204m over budget”: <a href="https://www.newsroom.co.nz/2020/06/03/1211066/transmission-gully-2022" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.newsroom.co.nz/2020/06/03/1211066/transmission-gully-2022&amp;source=gmail&amp;ust=1592007289335000&amp;usg=AFQjCNGQrTnINfAeEwr3bCTLep11t-g2fw" rel="noopener">Inside Transmission Gully’s PPP mess</a></li>
<li>Anecdotes highlight shrinking order books: "I've heard some pretty stark numbers bandied around ... companies [in New Zealand] losing 20 to 30 percent of their order book.” “One architecture firm had lost 15 to 20 percent of their commissions - a sign that less work would be coming in the future as well.”&nbsp; <a href="https://www.newsroom.co.nz/2020/06/10/1223566/skills-exodus-could-follow-re-opening-of-nz-oz-border" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.newsroom.co.nz/2020/06/10/1223566/skills-exodus-could-follow-re-opening-of-nz-oz-border&amp;source=gmail&amp;ust=1592007289335000&amp;usg=AFQjCNFOsEizbRhU6XMqkKAtJi5VFmsssQ" rel="noopener">‘Brain drain’ could follow border re-opening</a></li>
</ul>
<h3>Australia</h3>
<ul>
<li>Approvals lead indicator robust (for now?) (Construction finance approvals, Apr.): +2.9% mom, +1.6% yoy (previous -3.2% mom, -5.8% yoy).</li>
</ul>
Chart of the week: Finance approvals have held up well despite the pandemic
Australian dwelling approvals vs construction finance approvals (advanced 3 mths)
<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:1669242153313111617&amp;th=172a56e4f8560e41&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ_w4_U1x4cW16QfNluKxoMVRXARHxe2Mg6VyGYdDUVfefjqivoS39jW14A8yWNjaPm6SdPGDXlQ43EY4M0xgSPLh5emHjPR_WLzPciXPGq3ejwOpyXQNcUNH74&amp;disp=emb" width="457" height="340" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Source: Stats NZ
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

Building weekly
New Zealand

First week of lockdown impacts construction activity (1Q20): Residential volumes -5.8% qoq, -5.9% yoy (previous +1.3% qoq, +4.1% yoy). Non-residential -5.8% qoq, -11.2% yoy (previous -3.8% qoq, +3.0% yoy).
Fletchers in the headlines:

-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fletchers gains covenant flexibility:&nbsp;FBU has announced that its banking syndicate and USPP will relax&nbsp;covenants:&nbsp;total interest cover (to 1.5x from 2.0x) and senior interest cover (2.25x from 3.0x) from June 2020 to December 2021 if required. FBU has agreed it will not pay a dividend until it returns to normal covenant levels.
-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rocla still on the blocks:&nbsp;The suggested A$200m sale price would be a fantastic outcome for a business that makes single digit millions EBIT.&nbsp;Fletcher Building’s Rocla concrete pipes sale rolling on (behind paywall)
-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Taking a look at Wattyl?&nbsp;We would be surprised if FBU is looking at another tertiary business in Australia.&nbsp;US giant mulls options for Aussie paint business Wattyl (behind paywall)
-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost cutting begins with Placemakers closures in Christchurch and Helensville:&nbsp;Fletcher-owned Placemakers closes store and depot

“Two years late and $204m over budget”: Inside Transmission Gully’s PPP mess
Anecdotes highlight shrinking order books: "I've heard some pretty stark numbers bandied around ... companies [in New Zealand] losing 20 to 30 percent of their order book.” “One architecture firm had lost 15 to 20 percent of their commissions - a sign that less work would be coming in the future as well.”&nbsp; ‘Brain drain’ could follow border re-opening

Australia

Approvals lead indicator robust (for now?) (Construction finance approvals, Apr.): +2.9% mom, +1.6% yoy (previous -3.2% mom, -5.8% yoy).

Chart of the week: Finance approvals have held up well despite the pandemic
Australian dwelling approvals vs construction finance approvals (advanced 3 mths)

Source: Stats NZ
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

Fletcher Building

Building Weekly