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>Freightways<br>FY21 Preview&nbsp;— Waiting by the Door</h2>
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<p><strong>OUTPERFORM</strong></p>
<p>We expect&nbsp;Freightways&nbsp;(FRE) will deliver a strong set of FY21 results on 23 August 2021, driven by (1) a favourable volume environment in both the business-to-business (B2B) and business-to-consumer (B2C) parcel channels, (2) improved parcel&nbsp;margins resulting from its&nbsp;'pricing for effort' initiative, and (3) the&nbsp;accretive&nbsp;Big Chill acquisition (first full 12 months).&nbsp;We forecast underlying NPATA (net profit before acquisition related amortisation) of NZ$80.4m, up +35% on the prior year. While we expect FRE to be a net beneficiary of COVID-19, ongoing&nbsp;lockdowns&nbsp;in Australia will weigh on the Information Management division's near term performance. FRE&nbsp;trades on a one-year forward PE of ~21x on our earnings estimates (near the upper end of its historical range), however, we believe FRE providers a better quality and higher growth story than the FRE of yesteryear.&nbsp;OUTPERFORM.&nbsp;</p>
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<h3>Key issues at the FY21 result:</h3>
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<li><strong>Parcel network volume growth</strong>:&nbsp;FRE is enjoying its strongest volume backdrop in many years, driven by:&nbsp;(1) robust activity in the B2B channel, (2) material growth in B2C given&nbsp;the step-up in&nbsp;ecommerce&nbsp;activity since COVID-19 emerged, and&nbsp;(3) new customer wins across both channels.&nbsp;</li>
<li><strong>Pricing for Effort (PFE):</strong>&nbsp;FRE has, to date, demonstrated success implementing its PFE initiative, with further upside potential as it pursues the full NZ$1.50 per parcel premium on residential parcels, and an additional NZ$0.25 per parcel on across town deliveries.&nbsp;</li>
<li><strong>Big Chill</strong>: Will contribute its first full 12-month period having been consolidated from 1 April 2020. The earn-out based on FY21 and FY22 results is due to be paid in August 2022.&nbsp;&nbsp;</li>
<li><strong>COVID-19 impact on Australian operations</strong>:&nbsp;The ongoing lockdown in New South Wales and containment measures being taken in other states/territories&nbsp;will impact the outlook for&nbsp;FRE's&nbsp;Information Management operations, in particular its document destruction, storage service revenue and digitisation projects.&nbsp;&nbsp;</li>
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Freightways FY21 Preview&nbsp;— Waiting by the Door

OUTPERFORM
We expect&nbsp;Freightways&nbsp;(FRE) will deliver a strong set of FY21 results on 23 August 2021, driven by (1) a favourable volume environment in both the business-to-business (B2B) and business-to-consumer (B2C) parcel channels, (2) improved parcel&nbsp;margins resulting from its&nbsp;'pricing for effort' initiative, and (3) the&nbsp;accretive&nbsp;Big Chill acquisition (first full 12 months).&nbsp;We forecast underlying NPATA (net profit before acquisition related amortisation) of NZ$80.4m, up +35% on the prior year. While we expect FRE to be a net beneficiary of COVID-19, ongoing&nbsp;lockdowns&nbsp;in Australia will weigh on the Information Management division's near term performance. FRE&nbsp;trades on a one-year forward PE of ~21x on our earnings estimates (near the upper end of its historical range), however, we believe FRE providers a better quality and higher growth story than the FRE of yesteryear.&nbsp;OUTPERFORM.&nbsp;


Key issues at the FY21 result:



Parcel network volume growth:&nbsp;FRE is enjoying its strongest volume backdrop in many years, driven by:&nbsp;(1) robust activity in the B2B channel, (2) material growth in B2C given&nbsp;the step-up in&nbsp;ecommerce&nbsp;activity since COVID-19 emerged, and&nbsp;(3) new customer wins across both channels.&nbsp;
Pricing for Effort (PFE):&nbsp;FRE has, to date, demonstrated success implementing its PFE initiative, with further upside potential as it pursues the full NZ$1.50 per parcel premium on residential parcels, and an additional NZ$0.25 per parcel on across town deliveries.&nbsp;
Big Chill: Will contribute its first full 12-month period having been consolidated from 1 April 2020. The earn-out based on FY21 and FY22 results is due to be paid in August 2022.&nbsp;&nbsp;
COVID-19 impact on Australian operations:&nbsp;The ongoing lockdown in New South Wales and containment measures being taken in other states/territories&nbsp;will impact the outlook for&nbsp;FRE's&nbsp;Information Management operations, in particular its document destruction, storage service revenue and digitisation projects.&nbsp;&nbsp;



Freightways: FY21 Preview — Waiting by the Door

Freightways Ltd

Freightways: FY21 Preview — Waiting by the Door