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<br>Operations Exceeding Expectations</h2>
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<p><strong>OUTPERFORM</strong></p>
<p>NZX finished FY21 strongly, with December's monthly operating stats reporting final divisional metrics comfortably in excess of internal targets set at the start of the year for all divisions. We take the opportunity to incorporate the latest numbers into our model and update our forecasts accordingly. We also note an increasing number of job listings&nbsp;on the NZX website (ranging from sustainability adviser to risk, compliance and operations) and therefore increase our assumed headcount&nbsp;going forward. As a result, our FY21 EBITDA forecast of NZ$35.5m now sits at the top of the company's guided range of NZ$32.0m to NZ$35.5m. Despite growing labour costs, we remain attracted to&nbsp;NZX's&nbsp;strong balance sheet, track record of capital management, sustainable long term cash generation and believe management can execute on positive top line growth in order to offset ongoing cost pressure and generate meaningful operating leverage.&nbsp;</p>
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<h3>What's changed?&nbsp;</h3>
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<li><strong>Earnings</strong>:&nbsp;FY21 EBITDA increased +3% from NZ$34.4m to NZ$35.5m driven by final monthly operating stats</li>
<li><strong>Target price</strong>:&nbsp;Decreased&nbsp;marginally from NZ$2.05 to NZ$2.03 given&nbsp;increases to headcount assumptions</li>
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<h3>Issuer Relationships division: highest total capital raised since FY15</h3>
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<p>Total capital raised for FY21 reached NZ$19.8bn vs an internal target of NZ$10.0bn and Forsyth Barr forecast of NZ$15.0bn. Of this, NZ$4.7bn was primary equity issuance. This compares to NZ$17.6bn recorded in the prior year (driven by secondary capital issuance as a result of COVID-related balance sheet restructuring) and second only to the NZ$22.8bn of total capital raised in FY15.</p>
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<h3>Total traded value: just 2% short of record (COVID-19) year in FY20</h3>
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<p>Total value traded was reported at NZ$52.4bn (vs NZ$53.7bn in FY20) despite the heightened volatility in the prior year which saw several months of 'super-trading' resulting from COVID-19. This strong operating performance in the secondary markets division was supported by the Data and Insights division which reported an elevated number of terminal and licences throughout FY21.&nbsp;</p>
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<h3>Smartshares:&nbsp;finishes FY21 with all time high FUM of NZ$6.5bn</h3>
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<p>The Smartshares division saw continued momentum driven by strong net cash inflows and despite a slowdown in equity markets. Divisional performance was aided by growth in Kiwisaver which saw an increase of +NZ$400m FUM in December 21.&nbsp;</p>
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<h3>Wealth Tech: record NZ$11bn of Funds Under Administration reported</h3>
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<p>With three new smaller&nbsp;clients&nbsp;onboarded&nbsp;during the year&nbsp;the division again surprised to the upside, with FY21 Funds Under Administration growing from NZ$7.2bn at FY20 to NZ$11.0bn vs&nbsp;NZX's&nbsp;internal target of NZ$10.0bn at the start of the year.&nbsp;</p>
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NZX Operations Exceeding Expectations

OUTPERFORM
NZX finished FY21 strongly, with December's monthly operating stats reporting final divisional metrics comfortably in excess of internal targets set at the start of the year for all divisions. We take the opportunity to incorporate the latest numbers into our model and update our forecasts accordingly. We also note an increasing number of job listings&nbsp;on the NZX website (ranging from sustainability adviser to risk, compliance and operations) and therefore increase our assumed headcount&nbsp;going forward. As a result, our FY21 EBITDA forecast of NZ$35.5m now sits at the top of the company's guided range of NZ$32.0m to NZ$35.5m. Despite growing labour costs, we remain attracted to&nbsp;NZX's&nbsp;strong balance sheet, track record of capital management, sustainable long term cash generation and believe management can execute on positive top line growth in order to offset ongoing cost pressure and generate meaningful operating leverage.&nbsp;


What's changed?&nbsp;



Earnings:&nbsp;FY21 EBITDA increased +3% from NZ$34.4m to NZ$35.5m driven by final monthly operating stats
Target price:&nbsp;Decreased&nbsp;marginally from NZ$2.05 to NZ$2.03 given&nbsp;increases to headcount assumptions



Issuer Relationships division: highest total capital raised since FY15


Total capital raised for FY21 reached NZ$19.8bn vs an internal target of NZ$10.0bn and Forsyth Barr forecast of NZ$15.0bn. Of this, NZ$4.7bn was primary equity issuance. This compares to NZ$17.6bn recorded in the prior year (driven by secondary capital issuance as a result of COVID-related balance sheet restructuring) and second only to the NZ$22.8bn of total capital raised in FY15.


Total traded value: just 2% short of record (COVID-19) year in FY20


Total value traded was reported at NZ$52.4bn (vs NZ$53.7bn in FY20) despite the heightened volatility in the prior year which saw several months of 'super-trading' resulting from COVID-19. This strong operating performance in the secondary markets division was supported by the Data and Insights division which reported an elevated number of terminal and licences throughout FY21.&nbsp;


Smartshares:&nbsp;finishes FY21 with all time high FUM of NZ$6.5bn


The Smartshares division saw continued momentum driven by strong net cash inflows and despite a slowdown in equity markets. Divisional performance was aided by growth in Kiwisaver which saw an increase of +NZ$400m FUM in December 21.&nbsp;


Wealth Tech: record NZ$11bn of Funds Under Administration reported


With three new smaller&nbsp;clients&nbsp;onboarded&nbsp;during the year&nbsp;the division again surprised to the upside, with FY21 Funds Under Administration growing from NZ$7.2bn at FY20 to NZ$11.0bn vs&nbsp;NZX's&nbsp;internal target of NZ$10.0bn at the start of the year.&nbsp;


NZX

NZX: Operations Exceeding Expectations