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

Pushpay Holdings Ltd Great Expectations

OUTPERFORM
Proprietary&nbsp;feedback from over 25 US churches indicates that 1) average total giving for 2020 YTD ranges between +3% to +19% vs the prior year and that 2) digital penetration across medium to large churches has averaged 80% over the last six months. This is driven predominantly by increased church attendance through online channels, higher levels of aggregate generosity and unwillingness by church staff to handle cash. We raise our FY21 EBITDA forecast to US$60.8m against a consensus of US$55.1m, applying a conservative +1% for&nbsp;PPH's&nbsp;front book growth rate in FY21. This is principally due to COVID-19 restrictions limiting sales contact with prospective customer churches, and church elders postponing technology related decisions.&nbsp;We recognise that our forecasts now exceed&nbsp;PPH's&nbsp;current guidance&nbsp;(between US$50m and US$54m) by more than +10% and consequently expect the company to tighten or raise its FY21 guidance at the upcoming interim result.


What's changed?&nbsp;



FY21 EBITDA:&nbsp;Increased from US$55.9m to US$60.8m
Target price:&nbsp;Increased from NZ$13.05 to NZ$13.86



Interim results expected to demonstrate jump in digital penetration


We recognise the wide margin for error in forecasting&nbsp;PPH's&nbsp;1H21 interim result given the range of potential underlying drivers and 2H21 split of timing of costs and fees. This is in addition to a traditionally stronger second half of the year due to increased donations at Christmas (1H20/1H19 accounting for 44% of full year processing revenue). However, we expect the processing revenue split to be more even this year (our 1H21 estimate reflects a 48%:52% split) given the strong donations seen at the start of FY21&nbsp;and expected slowdown of the front book in 2H21. We expect to see a 1H21 jump in digital penetration and forecast&nbsp;EBITDA of US$29.4m.


Attendance numbers remain firm


Churches that we have spoken to have indicated that online service offerings have significantly increased overall attendance, with one church estimating aggregate attendance to be triple regular physical church.&nbsp;With US churches sporadically re-opening their doors since June, state by state, we estimate average physical church to currently account&nbsp;for between 20% and 50% of attendees. Many churches are now also increasing the number of services over the duration of the week in light of social distancing, with services on a weekday proving popular. We see this as a potential catalyst to drive&nbsp;longer term attendance and donations.&nbsp;


Valuation&nbsp;


We raise our target price to NZ$13.86, driven by our increased DCF valuation, more than offsetting the decrease in our implied EV/Sales multiple valuation. Our multiple approach is underpinned by our FY22 sales growth rate which decreases to 15% from 17% due to the abrupt hike in digital penetration in FY21; which was previously expected to grow incrementally across a number of years.




Jamie Foulkes
jamie.foulkes@forsythbarr.co.nz
+64 4 491 2217




Pushpay Holdings

Pushpay Holdings Ltd: Great Expectations