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>Conviction List</h2>
Add&nbsp;Infratil&nbsp;(IFT),&nbsp;SKYCITY&nbsp;(SKC), Spark (SPK), and&nbsp;Summerset&nbsp;(SUM)
We double the size of our conviction list from four to eight stocks with the addition of Infratil (IFT), SKYCITY (SKC), Spark (SPK) and Summerset (SUM). These additions provide greater diversification in a time of elevated volatility and market uncertainty, and greater exposure to a market recovery. Our conviction list now reflects a mixture of defensive cash-flow streams (CEN, IFT, SPK), consumer growth stories (ATM, SAN), aged care — where the downside risks have been overplayed and the sector could be a longer term beneficiary of COVID-19 (ARV, SUM), and one recovery play (SKC).
Rolling performance
Over the past 12 months the Conviction List has outperformed the NZX50 by +9.0% (up +6.9% vs. the S&amp;P/NZX50 down -2.1%). Since inception on 1 October 2016, it has outperformed by +43.9% (up +78.4% vs. the S&amp;P/NZX50 up +34.6%).
Add&nbsp;Infratil&nbsp;(IFT.NZ; OUTPERFORM)
We believe IFT is one of those stocks that has been oversold. IFT's investments are all defensive in nature and deemed essential services. CDC Data Centres and Vodafone are likely to be experiencing increased demand, Trustpower and Tilt Renewables are very defensive assets that will perform well during an economic downturn. These four investments represent 80% of its portfolio. The only investment under pressure is Wellington Airport (WIAL), however, we believe it has sufficient debt capacity (as does IFT) to deal with the downturn. In addition, 85% of WIAL's travellers are domestic, which we expect will recover faster than international.
Add&nbsp;SKYCITY&nbsp;(SKC.NZ; OUTPERFORM)
We add&nbsp;SKC&nbsp;to provide an exposure within the conviction list to the domestic recovery. Being definitive on the&nbsp;timeline&nbsp;is near impossible, however,&nbsp;SKC&nbsp;is predominantly a domestic grind business so well placed whenever we do get through the disruption period. There will clearly be a large near-term earnings shock and we acknowledge material near-term risks, however, the share price correction is out of step with any magnitude of scenarios around the risk, in our view. We believe&nbsp;SKC&nbsp;can navigate COVID-19 (admittedly with some battle scars), with its asset base and long-term monopoly casino licences providing some comfort of value above current market pricing.
Add Spark (SPK.NZ; OUTPERFORM)
We view&nbsp;telcos&nbsp;as one of the most&nbsp;defensive&nbsp;sectors in the current environment. The sector's revenue was resilient through the Global Financial Crisis, and today you have the added demand boost from people self-isolating in homes.&nbsp;SPK&nbsp;offers investors an attractive income yield, with the added&nbsp;defensive&nbsp;benefit of a strong A- balance sheet. Once the COVID-19 storm eventually settles, we expect we will be in a world of even lower interest rates and investors back searching for income.
Add&nbsp;Summerset&nbsp;(<a href="http://sum.nz/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://SUM.NZ&amp;source=gmail&amp;ust=1585613741752000&amp;usg=AFQjCNHWCS77Twa5183JWWMoRAGHJzBdYw" rel="noopener">SUM.NZ</a>; OUTPERFORM)
We add SUM to the conviction list following its recent de-rating. Since the outbreak of COVID-19 SUM is down -40% off its February peak. While we acknowledge the risk the virus poses to the elderly, we believe that the market has priced in a very gloomy scenario related to the outbreak. In our view, SUM, along with other major retirement/aged care operators, are well equipped to handle infectious diseases and look after its residents. At current pricing SUM is getting little credit for its development track record and pipeline.
Forsyth Barr Research Team fb.research@forsythbarr.co.nz +64 4 499 7464

Conviction List
Add&nbsp;Infratil&nbsp;(IFT),&nbsp;SKYCITY&nbsp;(SKC), Spark (SPK), and&nbsp;Summerset&nbsp;(SUM)
We double the size of our conviction list from four to eight stocks with the addition of Infratil (IFT), SKYCITY (SKC), Spark (SPK) and Summerset (SUM). These additions provide greater diversification in a time of elevated volatility and market uncertainty, and greater exposure to a market recovery. Our conviction list now reflects a mixture of defensive cash-flow streams (CEN, IFT, SPK), consumer growth stories (ATM, SAN), aged care — where the downside risks have been overplayed and the sector could be a longer term beneficiary of COVID-19 (ARV, SUM), and one recovery play (SKC).
Rolling performance
Over the past 12 months the Conviction List has outperformed the NZX50 by +9.0% (up +6.9% vs. the S&amp;P/NZX50 down -2.1%). Since inception on 1 October 2016, it has outperformed by +43.9% (up +78.4% vs. the S&amp;P/NZX50 up +34.6%).
Add&nbsp;Infratil&nbsp;(IFT.NZ; OUTPERFORM)
We believe IFT is one of those stocks that has been oversold. IFT's investments are all defensive in nature and deemed essential services. CDC Data Centres and Vodafone are likely to be experiencing increased demand, Trustpower and Tilt Renewables are very defensive assets that will perform well during an economic downturn. These four investments represent 80% of its portfolio. The only investment under pressure is Wellington Airport (WIAL), however, we believe it has sufficient debt capacity (as does IFT) to deal with the downturn. In addition, 85% of WIAL's travellers are domestic, which we expect will recover faster than international.
Add&nbsp;SKYCITY&nbsp;(SKC.NZ; OUTPERFORM)
We add&nbsp;SKC&nbsp;to provide an exposure within the conviction list to the domestic recovery. Being definitive on the&nbsp;timeline&nbsp;is near impossible, however,&nbsp;SKC&nbsp;is predominantly a domestic grind business so well placed whenever we do get through the disruption period. There will clearly be a large near-term earnings shock and we acknowledge material near-term risks, however, the share price correction is out of step with any magnitude of scenarios around the risk, in our view. We believe&nbsp;SKC&nbsp;can navigate COVID-19 (admittedly with some battle scars), with its asset base and long-term monopoly casino licences providing some comfort of value above current market pricing.
Add Spark (SPK.NZ; OUTPERFORM)
We view&nbsp;telcos&nbsp;as one of the most&nbsp;defensive&nbsp;sectors in the current environment. The sector's revenue was resilient through the Global Financial Crisis, and today you have the added demand boost from people self-isolating in homes.&nbsp;SPK&nbsp;offers investors an attractive income yield, with the added&nbsp;defensive&nbsp;benefit of a strong A- balance sheet. Once the COVID-19 storm eventually settles, we expect we will be in a world of even lower interest rates and investors back searching for income.
Add&nbsp;Summerset&nbsp;(SUM.NZ; OUTPERFORM)
We add SUM to the conviction list following its recent de-rating. Since the outbreak of COVID-19 SUM is down -40% off its February peak. While we acknowledge the risk the virus poses to the elderly, we believe that the market has priced in a very gloomy scenario related to the outbreak. In our view, SUM, along with other major retirement/aged care operators, are well equipped to handle infectious diseases and look after its residents. At current pricing SUM is getting little credit for its development track record and pipeline.
Forsyth Barr Research Team fb.research@forsythbarr.co.nz +64 4 499 7464


 Conviction List: Add Infratil (IFT), SKYCITY (SKC), Spark (SPK), and Summerset (SUM)

Infratil Ltd

Conviction List: Add Infratil (IFT), SKYCITY (SKC), Spark (SPK), and Summerset (SUM)