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).

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Manawa Energy<br>Metamorphosis&nbsp;Complete — FY22 Result</h2>
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<p><strong>UNDERPERFORM</strong></p>
<p>Manawa's&nbsp;(MNW) metamorphosis into a stand-alone generator is complete now that it has reported its last result as a generator/retailer and the sale of its retail business has happened. FY22 EBITDAF of NZ$204m was up +NZ$4m on FY21, a solid result considering the challenging hydro conditions, although it was aided by NZ$11m of non-cash adjustments.&nbsp;MNW's&nbsp;future as an asset developer took another step, with MNW revealing a 120MW solar project near Coromandel. Notwithstanding a growing development pipeline and favourable wholesale electricity prices, MNW is the most expensive electricity stock in the NZ market, trading on the highest earnings multiples and lowest dividend yield. UNDERPERFORM.</p>
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<h3>What's changed?&nbsp;</h3>
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<li><strong>Earnings</strong>:&nbsp;FY23/FY24/FY25 EBITDAF changed -NZ$4m/+NZ$3m/+NZ$1m to NZ$147m/NZ$145m/NZ$149m respectively</li>
<li><strong>Target price</strong>:&nbsp;Increased +10cps (+2.0%) to NZ$5.20</li>
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<h3>Last result as a generator/retailer solid in light of soft hydro generation, final dividend a modest disappointment</h3>
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<p>MNW's&nbsp;FY22 EBITDAF was split NZ$160m generation/NZ$44m retail, both divisions up +2% on FY21. FY22 was a year of transition, with MNW incurring NZ$7m of transaction related costs, offsetting NZ$11m of non-cash gains and hydro generation volumes +3% better than FY21 (but still -10% below normal).&nbsp;MNW's&nbsp;final dividend of 16cps was down -1cps on recent periods, a modest surprise. Looking forward, MNW reaffirmed FY23 EBITDAF guidance of NZ$140m to NZ$160m, but noted&nbsp;difficult generation conditions in the first six weeks. We trimmed our FY23 EBITDAF forecast -2.4% to NZ$147m reflecting the challenging hydro situation. Later year earnings increased modestly due to rising wholesale electricity prices, helping to lift our&nbsp;target price&nbsp;+10cps to NZ$5.20.</p>
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<h3>Development pipeline continues to grow with solar looking the most likely</h3>
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<p>MNW appears to be&nbsp;focussing&nbsp;on solar, announcing a new 120MW project close to beginning&nbsp;the consenting process. The near-term focus on solar is logical given its speed to market and MNW is well-placed with its hydro generation to provide solar-backed firmed&nbsp;offtake&nbsp;contracts. That said, MNW has yet to push go on any development and its initial spare balance sheet capacity of ~NZ$150m is sufficient to fund one ~120MW solar project itself. MNW will have to use its capital wisely to maximise its development potential.</p>
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<h3>Positive aspects but very expensive</h3>
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<p>Whilst&nbsp;MNW's&nbsp;development strategy makes sense and is appealing, MNW is expensive. We estimate underlying FY24 EBITDAF to be ~NZ$145m, which will support an 18cps dividend. The decline in near-term earnings and dividend means&nbsp;MNW's&nbsp;FY24 gross dividend yield is almost -2.0% lower than Meridian Energy's (MEL) at 3.6% and its EV/EBITDAF multiple is at a +15% premium. MEL is normally the most expensive electricity stock. MNW is a quality&nbsp;company,&nbsp; but it lacks size, liquidity and asset quality vs. MEL.</p>
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Manawa Energy Metamorphosis&nbsp;Complete — FY22 Result

UNDERPERFORM
Manawa's&nbsp;(MNW) metamorphosis into a stand-alone generator is complete now that it has reported its last result as a generator/retailer and the sale of its retail business has happened. FY22 EBITDAF of NZ$204m was up +NZ$4m on FY21, a solid result considering the challenging hydro conditions, although it was aided by NZ$11m of non-cash adjustments.&nbsp;MNW's&nbsp;future as an asset developer took another step, with MNW revealing a 120MW solar project near Coromandel. Notwithstanding a growing development pipeline and favourable wholesale electricity prices, MNW is the most expensive electricity stock in the NZ market, trading on the highest earnings multiples and lowest dividend yield. UNDERPERFORM.


What's changed?&nbsp;



Earnings:&nbsp;FY23/FY24/FY25 EBITDAF changed -NZ$4m/+NZ$3m/+NZ$1m to NZ$147m/NZ$145m/NZ$149m respectively
Target price:&nbsp;Increased +10cps (+2.0%) to NZ$5.20



Last result as a generator/retailer solid in light of soft hydro generation, final dividend a modest disappointment


MNW's&nbsp;FY22 EBITDAF was split NZ$160m generation/NZ$44m retail, both divisions up +2% on FY21. FY22 was a year of transition, with MNW incurring NZ$7m of transaction related costs, offsetting NZ$11m of non-cash gains and hydro generation volumes +3% better than FY21 (but still -10% below normal).&nbsp;MNW's&nbsp;final dividend of 16cps was down -1cps on recent periods, a modest surprise. Looking forward, MNW reaffirmed FY23 EBITDAF guidance of NZ$140m to NZ$160m, but noted&nbsp;difficult generation conditions in the first six weeks. We trimmed our FY23 EBITDAF forecast -2.4% to NZ$147m reflecting the challenging hydro situation. Later year earnings increased modestly due to rising wholesale electricity prices, helping to lift our&nbsp;target price&nbsp;+10cps to NZ$5.20.


Development pipeline continues to grow with solar looking the most likely


MNW appears to be&nbsp;focussing&nbsp;on solar, announcing a new 120MW project close to beginning&nbsp;the consenting process. The near-term focus on solar is logical given its speed to market and MNW is well-placed with its hydro generation to provide solar-backed firmed&nbsp;offtake&nbsp;contracts. That said, MNW has yet to push go on any development and its initial spare balance sheet capacity of ~NZ$150m is sufficient to fund one ~120MW solar project itself. MNW will have to use its capital wisely to maximise its development potential.


Positive aspects but very expensive


Whilst&nbsp;MNW's&nbsp;development strategy makes sense and is appealing, MNW is expensive. We estimate underlying FY24 EBITDAF to be ~NZ$145m, which will support an 18cps dividend. The decline in near-term earnings and dividend means&nbsp;MNW's&nbsp;FY24 gross dividend yield is almost -2.0% lower than Meridian Energy's (MEL) at 3.6% and its EV/EBITDAF multiple is at a +15% premium. MEL is normally the most expensive electricity stock. MNW is a quality&nbsp;company,&nbsp; but it lacks size, liquidity and asset quality vs. MEL.


Manawa Energy: Metamorphosis Complete — FY22 Result

Manawa Energy Ltd

Manawa Energy: Metamorphosis Complete — FY22 Result