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>Mainfreight<br>Q2 Peer Read-through — A Blue Blooded Anomaly</h2>
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<p><strong>OUTPERFORM</strong></p>
<p>Second quarter 2020 results from&nbsp;Mainfreight's&nbsp;(MFT) key global peers highlight material decline in freight demand as a result of COVID-19, but resilient margins across most industry segments. ​​​​​​​MFT&nbsp;released its corresponding quarterly results at its Annual Shareholder Meeting on 30 July 2020, highlighting a stellar quarter, with revenue up +8% and pre-tax profit up +20% on the same period last year. Its&nbsp;superior performance in the context of broader&nbsp;industry profitability decline highlights its best-in-class characteristics and continued strong growth potential.&nbsp;MFT&nbsp;is trading at a one year forward PE of ~26x, a discount to its closest but significantly larger peers. We retain an OUTPERFORM rating.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/155/261/original/image_33954087231598490112679.png?1598490116" class="editor-image img-responsive" data-smartkarma-image-id="155261"></figure>
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<h3>Global peer 2Q20 highlights:</h3>
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<li><strong>Revenue growth</strong>:&nbsp;MFT's&nbsp;global peers reported an average revenue decline of -9%, driven by weaker&nbsp;seafreight, less-than-truckload (LTL) transport and logistics (warehousing) industry segments.</li>
<li><strong>Airfreight rates&nbsp;ramp&nbsp;up</strong>: Airfreight rates grew sharply&nbsp;in 2Q20 as a result of reduced supply and&nbsp;increased demand for time sensitive deliveries of technology and medical equipment. This led to a +26% increase in revenue and +6% increase in&nbsp;EBITDA&nbsp;across the airfreight segment.</li>
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<h3>Industry revenue hit by&nbsp;COVID-19&nbsp;lockdowns;&nbsp;margins remain resilient</h3>
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<p>Government restrictions globally have had a material impact on revenue for the majority of MFT's listed peers, with the lower average revenues in 2Q20 following four consecutive quarters of revenue decline. LTL experienced the largest revenue hit, whilst Airfreight services experienced revenue growth due to the high demand for higher yielding time-sensitive services and significant rate increases. Despite industry disruption, EBITDA margins have grown in all industry segments across MFT's listed peers. Airfreight margins experienced the largest increase, likely a function of tight supply due to COVID-19.</p>
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<h3>Implications for MFT</h3>
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<p>MFT has different geographic and business mix exposures to a number of its key global listed peers, however, it is reliant on many of the same broader macro and industry wide influences. We, therefore, believe that the financial performance of its peers provides a useful benchmark for analysing MFT's performance. Its strong 1Q21 results highlight its ability to win meaningful market share despite challenging market conditions.&nbsp;</p>
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<div><strong>Andy Bowley</strong></div>
<div><a href="mailto:andy.bowley@forsythbarr.co.nz" target="_blank" rel="noopener">andy.bowley@forsythbarr.co.nz</a></div>
<div>+64 4 495 8246</div>
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<div><strong>Scott Anderson</strong></div>
<div><a href="mailto:scott.anderson@forsythbarr.co.nz" target="_blank" rel="noopener">scott.anderson@forsythbarr.co.<wbr>nz</a></div>
<div>+64 4 914 2219</div>
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Mainfreight Q2 Peer Read-through — A Blue Blooded Anomaly

OUTPERFORM
Second quarter 2020 results from&nbsp;Mainfreight's&nbsp;(MFT) key global peers highlight material decline in freight demand as a result of COVID-19, but resilient margins across most industry segments. ​​​​​​​MFT&nbsp;released its corresponding quarterly results at its Annual Shareholder Meeting on 30 July 2020, highlighting a stellar quarter, with revenue up +8% and pre-tax profit up +20% on the same period last year. Its&nbsp;superior performance in the context of broader&nbsp;industry profitability decline highlights its best-in-class characteristics and continued strong growth potential.&nbsp;MFT&nbsp;is trading at a one year forward PE of ~26x, a discount to its closest but significantly larger peers. We retain an OUTPERFORM rating.


Global peer 2Q20 highlights:



Revenue growth:&nbsp;MFT's&nbsp;global peers reported an average revenue decline of -9%, driven by weaker&nbsp;seafreight, less-than-truckload (LTL) transport and logistics (warehousing) industry segments.
Airfreight rates&nbsp;ramp&nbsp;up: Airfreight rates grew sharply&nbsp;in 2Q20 as a result of reduced supply and&nbsp;increased demand for time sensitive deliveries of technology and medical equipment. This led to a +26% increase in revenue and +6% increase in&nbsp;EBITDA&nbsp;across the airfreight segment.



Industry revenue hit by&nbsp;COVID-19&nbsp;lockdowns;&nbsp;margins remain resilient


Government restrictions globally have had a material impact on revenue for the majority of MFT's listed peers, with the lower average revenues in 2Q20 following four consecutive quarters of revenue decline. LTL experienced the largest revenue hit, whilst Airfreight services experienced revenue growth due to the high demand for higher yielding time-sensitive services and significant rate increases. Despite industry disruption, EBITDA margins have grown in all industry segments across MFT's listed peers. Airfreight margins experienced the largest increase, likely a function of tight supply due to COVID-19.


Implications for MFT


MFT has different geographic and business mix exposures to a number of its key global listed peers, however, it is reliant on many of the same broader macro and industry wide influences. We, therefore, believe that the financial performance of its peers provides a useful benchmark for analysing MFT's performance. Its strong 1Q21 results highlight its ability to win meaningful market share despite challenging market conditions.&nbsp;



Andy Bowley
andy.bowley@forsythbarr.co.nz
+64 4 495 8246





Scott Anderson
scott.anderson@forsythbarr.co.nz
+64 4 914 2219



Mainfreight: Q2 Peer Read-Through — A Blue Blooded Anomaly

Mainfreight Ltd

Mainfreight: Q2 Peer Read-Through — A Blue Blooded Anomaly