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>NZX First take: FY21 Result and GDT partnership announced with capital raise</h2>
NZX reported a solid FY21 result with underlying EBITDA of NZ$35.8 vs our forecast NZ$35.5m (consensus NZ$35.0m)
FY22 EBITDA guidance however of NZ$33.5m-NZ$38.0m was weaker than expected vs our current FY22 EBITDA of NZ$38.5m
NZX has also announced a proposal to invest a 33% stake in Global Diary Trade (alongside EEX and Fonterra) for NZ$12.5m
Additional spend to invest into the platform is expected to be NZ$3.2m and as a result the company is raising NZ$44m of capital to fund the proposed ownership stake
Capital raise and offer rights details
As a result of the proposed ownership stake of GDT, NZX is proposing to raise NZ$44m to 1) fund the acquisition and additional expenses involved and 2) keep the balance sheet conservatively positioned
NZX is offering a renounceable entitlement offer providing all eligible shareholders the opportunity to purchase 1 new share for every 9 NZX shares held at 5pm NZ on Friday 18th February
The offer price is NZ$1.42 per share (a discount of 15% to theoretical ex-rights price of NZ$1.67 and a 16.4% discount to the last close price on 16 February of NZ$1.73 less a final dividend of 3.1cps)
The institutional component of the offer occurs on 17 February (today) with confirmations due by 10am on 18 February
Eligible retail shareholders will have until 7pm on Friday 11 March 2022 to subscribe for new shares under the retail offer
Key Areas of interest from the result
<ul>
<li>Revenue was slightly lower (-1%) than our forecast NZ$88.4m likely driven by marginally lower fees than expected in the core divisions</li>
<li>EBITDA margin of 40.6% vs our forecast 40.2% drove a marginal beat at the EBITDA level, with some of the forecast increase in cost in FY21 likely falling into FY22</li>
<li>CAPEX of NZ$17m is broadly in line with our forecast of NZ$18m</li>
<li>Strong operational performance in the year saw divisional targets comfortably exceeded in the core divisions with 1) NZ$19.8bn of capital raised vs a target of NZ$10bn and 2) total value traded of&nbsp; NZ$52.4bn vs a target of NZ$45bn.</li>
<li>Total FUM of NZ$6.5bn in the Funds Under Management division has already exceed the five year aspirational FY23 target of NZ$5-5.75bn while the Wealth Technologies division reported total FUA of NZ$11bn vs a target of NZ$10bn.</li>
</ul>
Divisional detail
<ul>
<li>The core divisions (now combined as Issuer Relationships, Secondary Markets, Data and the Regulation division) saw a beat at EBITDA level and slight miss at the revenue line</li>
<li>Funds Under Management generated better than expected revenue, with EBITDA slightly below</li>
<li>Wealth Technologies generated a positive EBITDA for the first time with revenue broadly in line with expectations</li>
</ul>
FY22 Guidance
<ul>
<li>Guidance of NZ$33.5m to NZ$38.0m was weaker than our expected FY22 EBITDA of NZ$38.5m (consensus NZ$39.3m).</li>
<li>Comments in the release suggest this is ‘conservatively positioned’ given 1) increased market volatility at the start of the year and 2) a general tightening of financial conditions</li>
<li>We also note comments around building for growth has translated into an investment felt predominantly in 2022 and earnings expected to be delivered from 2023.</li>
</ul>
Results Tables
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/257/646/original/image_83395214051645061240406.png?1645061240" class="editor-image img-responsive" data-smartkarma-image-id="257646"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/257/647/original/image_80178937161645061248407.png?1645061247" class="editor-image img-responsive" data-smartkarma-image-id="257647"></figure>
Analyst Call 10am NZT
DATE: Thursday, 17 February 2022 START TIME: 10.00am (NZDT) CONFERENCE ID:&nbsp;<a href="https://attendee.gotowebinar.com/register/6724948887369650704" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://attendee.gotowebinar.com/register/6724948887369650704&amp;source=gmail&amp;ust=1645146433992000&amp;usg=AOvVaw2OyPGLx2ojKh3Jxprt1eds" rel="noopener">https://attendee.gotowebinar.com/register/6724948887369650704</a>

NZX First take: FY21 Result and GDT partnership announced with capital raise
NZX reported a solid FY21 result with underlying EBITDA of NZ$35.8 vs our forecast NZ$35.5m (consensus NZ$35.0m)
FY22 EBITDA guidance however of NZ$33.5m-NZ$38.0m was weaker than expected vs our current FY22 EBITDA of NZ$38.5m
NZX has also announced a proposal to invest a 33% stake in Global Diary Trade (alongside EEX and Fonterra) for NZ$12.5m
Additional spend to invest into the platform is expected to be NZ$3.2m and as a result the company is raising NZ$44m of capital to fund the proposed ownership stake
Capital raise and offer rights details
As a result of the proposed ownership stake of GDT, NZX is proposing to raise NZ$44m to 1) fund the acquisition and additional expenses involved and 2) keep the balance sheet conservatively positioned
NZX is offering a renounceable entitlement offer providing all eligible shareholders the opportunity to purchase 1 new share for every 9 NZX shares held at 5pm NZ on Friday 18th February
The offer price is NZ$1.42 per share (a discount of 15% to theoretical ex-rights price of NZ$1.67 and a 16.4% discount to the last close price on 16 February of NZ$1.73 less a final dividend of 3.1cps)
The institutional component of the offer occurs on 17 February (today) with confirmations due by 10am on 18 February
Eligible retail shareholders will have until 7pm on Friday 11 March 2022 to subscribe for new shares under the retail offer
Key Areas of interest from the result

Revenue was slightly lower (-1%) than our forecast NZ$88.4m likely driven by marginally lower fees than expected in the core divisions
EBITDA margin of 40.6% vs our forecast 40.2% drove a marginal beat at the EBITDA level, with some of the forecast increase in cost in FY21 likely falling into FY22
CAPEX of NZ$17m is broadly in line with our forecast of NZ$18m
Strong operational performance in the year saw divisional targets comfortably exceeded in the core divisions with 1) NZ$19.8bn of capital raised vs a target of NZ$10bn and 2) total value traded of&nbsp; NZ$52.4bn vs a target of NZ$45bn.
Total FUM of NZ$6.5bn in the Funds Under Management division has already exceed the five year aspirational FY23 target of NZ$5-5.75bn while the Wealth Technologies division reported total FUA of NZ$11bn vs a target of NZ$10bn.

Divisional detail

The core divisions (now combined as Issuer Relationships, Secondary Markets, Data and the Regulation division) saw a beat at EBITDA level and slight miss at the revenue line
Funds Under Management generated better than expected revenue, with EBITDA slightly below
Wealth Technologies generated a positive EBITDA for the first time with revenue broadly in line with expectations

FY22 Guidance

Guidance of NZ$33.5m to NZ$38.0m was weaker than our expected FY22 EBITDA of NZ$38.5m (consensus NZ$39.3m).
Comments in the release suggest this is ‘conservatively positioned’ given 1) increased market volatility at the start of the year and 2) a general tightening of financial conditions
We also note comments around building for growth has translated into an investment felt predominantly in 2022 and earnings expected to be delivered from 2023.

Results Tables


Analyst Call 10am NZT
DATE: Thursday, 17 February 2022 START TIME: 10.00am (NZDT) CONFERENCE ID:&nbsp;https://attendee.gotowebinar.com/register/6724948887369650704

NZX

NZX: FY21 First Take