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>Chorus FY20 – First Impressions</h2>
There is nothing materially new in Chorus’s (CNU) FY20 result. Revenue, EBITDA, capex, and dividends were all in line with our forecast.
CNU explicitly outlined that it will transition to a free cash flow (FCF) based dividend policy from FY22. We estimate from FY24 (when the ultrafast broadband (UFB) fibre network build is largely complete) CNU will generate FCF of c.NZ70cps (albeit with nil tax paid), facilitating a material lift in dividend over the medium-term.
Guidance
CNU provided FY21 guidance:
<ul>
<li>EBITDA NZ$640-660m vs. Forbar NZ$654m / consensus NZ$659m.</li>
<li>Capex NZ$630-670m vs. Forbar NZ$575m / consensus NZ$594m due to higher expected fibre connections, and c.NZ$30m for a (largely government funded) West Coast fibre rollout.</li>
<li>Dividend NZ25cps in line with Forbar / consensus.</li>
</ul>
Investor briefing
Conference call: 10:00am (NZ time), NZ 0800 452 257, AU 1800 093 431, HK +852 3005 2399, Singapore 800 120 6856, US 1877 788 9032, int’l +61 2 8047 9393. Passcode: 80032959#.
Webcast:&nbsp;<a href="http://www.chorus.co.nz/webcast" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://www.chorus.co.nz/webcast&amp;source=gmail&amp;ust=1598315384462000&amp;usg=AFQjCNGXm7vng98HeAOqA7X4CA6doEcQ2Q" rel="noopener">www.chorus.co.nz/webcast</a>
FY20 result summary
<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:1675853021329407966&amp;th=1741d371a01abfde&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ9HAKk-uVT85Bc_D9h6trJeOfxHzV4gwL7jkS6QyXyg_rkXeKUMkjd-w0UbEzcA7CgavhvpVJGwyCFv-gRIXd6rD3UKXPBi3WMTXstp4HXz4Ej2HlDo40SkBRg&amp;disp=emb" width="441" height="122" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Source: Company reports, Forsyth Barr analysis
Matt Henry &nbsp;CFA Head of Wealth Management Research
<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:1675853021329407966&amp;th=1741d371a01abfde&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ-bcBXSFPbuU9zNx3A3mG4bHKKzfnycuX9haJD-trvm7E_1lSL2M5lozsCi2f2GNgvNIpcleHudYZUCr-2pGPBPQ6oHup0vTuCFFFNV5QMkOBv3NiHn1KTdguU&amp;disp=emb" class="editor-image img-responsive"></figure>
M: +64 21 329 291 |P: +64 9 368 0115 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Chorus FY20 – First Impressions
There is nothing materially new in Chorus’s (CNU) FY20 result. Revenue, EBITDA, capex, and dividends were all in line with our forecast.
CNU explicitly outlined that it will transition to a free cash flow (FCF) based dividend policy from FY22. We estimate from FY24 (when the ultrafast broadband (UFB) fibre network build is largely complete) CNU will generate FCF of c.NZ70cps (albeit with nil tax paid), facilitating a material lift in dividend over the medium-term.
Guidance
CNU provided FY21 guidance:

EBITDA NZ$640-660m vs. Forbar NZ$654m / consensus NZ$659m.
Capex NZ$630-670m vs. Forbar NZ$575m / consensus NZ$594m due to higher expected fibre connections, and c.NZ$30m for a (largely government funded) West Coast fibre rollout.
Dividend NZ25cps in line with Forbar / consensus.

Investor briefing
Conference call: 10:00am (NZ time), NZ 0800 452 257, AU 1800 093 431, HK +852 3005 2399, Singapore 800 120 6856, US 1877 788 9032, int’l +61 2 8047 9393. Passcode: 80032959#.
Webcast:&nbsp;www.chorus.co.nz/webcast
FY20 result summary

Source: Company reports, Forsyth Barr analysis
Matt Henry &nbsp;CFA Head of Wealth Management Research

M: +64 21 329 291 |P: +64 9 368 0115 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Chorus Ltd

Chorus: FY20 – First Impressions