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>Property For Industry 1H21 Revaluation Gains of +14%</h2>
Property For Industry (PFI) has announced a 1H21 revaluation gain of NZ$240m (+14%), driven by capitalisation rate compression of -85bps (passing yield now 4.64%). This lifts NTA by 50cps to NZ$2.71, versus its last traded price of NZ$2.86. The strong revaluations are in line with the market implied compression of c.90bps, revaluations recorded by peers, and sales evidence in the direct market. Demand for industrial property has remained robust in recent months, with agents now seeing assets trade in the low-to-mid-3% yields.
Our rating on PFI is UNDERPERFORM. While PFIs industrial focussed portfolio is attractive given structural tailwinds, we believe this is priced in at current levels and see better value in other LPVs. PFI is currently trading at a +6% premium to its revised NTA, on a 4.0% gross yield (vs LPV sector average of 5.2%), and a sector low 2.9% AFFO yield (vs peers at 3.7%). Additionally, we see little scope for operational outperformance vs peers given PFI’s portfolio lacks near-term redevelopment opportunities, and is thus more reliant on ongoing favourable sub-sector dynamics and leasing outcomes over the next couple of years.
Figure 1. Capitalisation rate compression catch up – PFI vs GMT
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Source: Forsyth Barr analysis, Company reports
Rohan Koreman-Smit Senior Analyst, Equities
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.2&amp;permmsgid=msg-f:1703220161831707956&amp;th=17a30db690432534&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ_lSSh536zGpaS2Q-uNCl3779Ki8BlzBwRh2Rroxfxo5o48hTtM6nqpig0ATSsOeMEu-uwd43XLpw_iW75t7JJHWEIREXQl9hTDeBy1ZSrC7TTohS61R1wFEbY&amp;disp=emb" class="editor-image img-responsive"></figure>
 P:&nbsp;<a href="tel:+6493680085" target="_blank" data-stringify-link="tel:+6493680085" data-sk="tooltip_parent" rel="noopener">+64 9 368 0085</a>&nbsp;| TF: 0800 367 227 Level 23, Shortland &amp; Fort, 88 Shortland Street, Auckland

Property For Industry 1H21 Revaluation Gains of +14%
Property For Industry (PFI) has announced a 1H21 revaluation gain of NZ$240m (+14%), driven by capitalisation rate compression of -85bps (passing yield now 4.64%). This lifts NTA by 50cps to NZ$2.71, versus its last traded price of NZ$2.86. The strong revaluations are in line with the market implied compression of c.90bps, revaluations recorded by peers, and sales evidence in the direct market. Demand for industrial property has remained robust in recent months, with agents now seeing assets trade in the low-to-mid-3% yields.
Our rating on PFI is UNDERPERFORM. While PFIs industrial focussed portfolio is attractive given structural tailwinds, we believe this is priced in at current levels and see better value in other LPVs. PFI is currently trading at a +6% premium to its revised NTA, on a 4.0% gross yield (vs LPV sector average of 5.2%), and a sector low 2.9% AFFO yield (vs peers at 3.7%). Additionally, we see little scope for operational outperformance vs peers given PFI’s portfolio lacks near-term redevelopment opportunities, and is thus more reliant on ongoing favourable sub-sector dynamics and leasing outcomes over the next couple of years.
Figure 1. Capitalisation rate compression catch up – PFI vs GMT

Source: Forsyth Barr analysis, Company reports
Rohan Koreman-Smit Senior Analyst, Equities

 P:&nbsp;+64 9 368 0085&nbsp;| TF: 0800 367 227 Level 23, Shortland &amp; Fort, 88 Shortland Street, Auckland

Property for Industry (PFI): 1H21 Revaluation Lifts NTA +50cps to NZ$2.71