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

Infratil Reverting to a 'New Normal'

NEUTRAL
IFT held a confident investor day with the first half focussed on longer term opportunities within renewables and healthcare and the second half focussed on its core value drivers, Canberra Data Centres (CDC) and Vodafone NZ. We walk away encouraged by the pace of progress for Longroad Energy (US based renewables) and Galileo Green Energy (Europe based renewables) where the case for substantial long term value creation was clearly laid out. Shorter term, we believe IFT's share price will be dominated by the strategic review of Tilt Renewables (TLT), CDC's performance and valuation and Vodafone NZ along with the potential for an increased offer price by the Australian Super Fund. There was no incremental newsflow out of the investor day related to these key value drivers and we remain NEUTRAL with a slightly increased target price of NZ$7.85.&nbsp;


What's changed?&nbsp;



Earnings:&nbsp;Our proportionate FY21/22/23 EBITDAF forecasts increase&nbsp;by +2%/+7%/+7% driven by the incorporation of&nbsp;Qscan.
Target price:&nbsp;Increases&nbsp;to NZ$7.85 (from NZ$7.70), primarily due to the mark to market&nbsp;of TLT.&nbsp;



Attractive internal investment opportunities; a scarce asset to be appreciated


In today's ultra low yield environment a wall of capital is chasing diminishing investment returns, driving share prices up and bond yields down. In this context we find it very encouraging that IFT does not appear to be running low on attractive investment opportunities with double digit target returns within its existing portfolio companies. Specifically, we were encouraged by the pace at which both Longroad Energy (US) and Galileo Green Energy (Europe) have evolved. Both of these investments have the potential to grow into meaningful parts of the broader IFT portfolio over the next 5–10 years. However, near-term we do not believe that the development of these two assets will be a meaningful driver of IFT's NAV or share price.&nbsp;


TLT conclusion likely within the next few months; no shortages of future ideas and opportunities


There were no firm progress updates on the ongoing TLT strategic review but IFT's outgoing CEO, Marko Bogoievski, expects a "solid update" by financial year end (March 31). He also indicated that the potential NZ$1.5bn of proceeds for TLT "may be conservative". A TLT valuation of NZ$1.5bn compares to IFT's stake at the current market price of c. NZ$1.6bn, suggesting that current proposals are comfortably circling where TLT is currently trading. While far from certain, at this point we view it as likely that TLT will be sold leaving IFT with up to NZ$2bn of capital to invest. IFT's incoming CEO, Jason Boyes, suggested that there were "no shortages of ideas and opportunities", some of which may be considered outside of IFT's traditional area of expertise, namely scalable infrastructure. Amongst many potential investments, IFT listed next generation assets such as Artificial Intelligence, Robotics and 5G technology. We view it as more likely that IFT would buy some mobile towers than take on&nbsp; Alphabet's&nbsp;&nbsp;Waymo, but we have been surprised before.&nbsp;



Aaron Ibbotson CFA
aaron.ibbotson@forsythbarr.co.nz
+64 9 368 0024





Matt Montgomerie
matt.montgomerie@forsythbarr.co.nz
+64 9 368 0124



Infratil Ltd

Infratil: Reverting to a 'New Normal'