New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

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.

Thematic (Sector/Industry)

<ul><li>Residential consents were broadly flat in March. They have been range bound at 30-35k since August 2023 which is slightly below the level generally understood to be annual build capacity in NZ.</li><li>This is despite our channel checks suggesting that residential construction activity is declining as higher interest rates, inflated construction costs and lower house prices make the feasibility of new residential construction challenging.</li><li>While (1) construction costs are showing some signs of easing, with sub-contractors pricing down, and (2) strong net migration likely to drive net housing demand, a recovery in construction activity will likely require lower interest rates and/or increasing house prices. </li></ul>

Residential consents were broadly flat in March. They have been range bound at 30-35k since August 2023 which is slightly below the level generally understood to be annual build capacity in NZ.This is despite our channel checks suggesting that residential construction activity is declining as higher interest rates, inflated construction costs and lower house prices make the feasibility of new residential construction challenging.While (1) construction costs are showing some signs of easing, with sub-contractors pricing down, and (2) strong net migration likely to drive net housing demand, a recovery in construction activity will likely require lower interest rates and/or increasing house prices. 

Building Sector - NZ Consents — Are We There Yet?

<ul><li>In our third Pulse of NZ Business survey with ~550 respondents, three things stood out; (1) there has been a major positive shift with regards to respondents view that the economy is heading in the right direction.</li><li>From an extremely negative position to a largely neutral one. Overall this more positive sentiment towards NZ in general and the government specifically is illustrated across several questions.</li><li>(2) Demand, rather than inflation, regulation or labour shortages has emerged as the number one challenge facing businesses for the first time. (3) There is a clear and widening spread between more cyclical business (e.g. freight, construction and manufacturing), all of which are experiencing weak and weakening demand versus less cyclical sectors (primarily aged care and utilities) which are experiencing improving demand and expect profits to improve over the next 12 months. </li></ul>

In our third Pulse of NZ Business survey with ~550 respondents, three things stood out; (1) there has been a major positive shift with regards to respondents view that the economy is heading in the right direction.From an extremely negative position to a largely neutral one. Overall this more positive sentiment towards NZ in general and the government specifically is illustrated across several questions.(2) Demand, rather than inflation, regulation or labour shortages has emerged as the number one challenge facing businesses for the first time. (3) There is a clear and widening spread between more cyclical business (e.g. freight, construction and manufacturing), all of which are experiencing weak and weakening demand versus less cyclical sectors (primarily aged care and utilities) which are experiencing improving demand and expect profits to improve over the next 12 months. 

The Pulse of NZ Business - Forsyth Barr Business Survey — Bifurcation

Equity Bottom-Up

Serko Ltd operates as an online corporate travel booking and expense management company.

<ul><li>Serko (SKO) has renewed its key partnership with Booking.com for a new five-year term, though on less favourable terms than its prior agreement. </li><li>This is a pivotal development for SKO with the strategic importance of the Booking.com relationship (responsible for nearly two-thirds of SKO's total revenue in FY24 and growing) unable to be understated.</li><li>The renewal, effective from the start of FY25 through to the end of FY29, sees the introduction of a tiered revenue-sharing system that decreases SKO's revenue share as the volume of room nights booked increases. </li></ul>

Serko (SKO) has renewed its key partnership with Booking.com for a new five-year term, though on less favourable terms than its prior agreement. This is a pivotal development for SKO with the strategic importance of the Booking.com relationship (responsible for nearly two-thirds of SKO's total revenue in FY24 and growing) unable to be understated.The renewal, effective from the start of FY25 through to the end of FY29, sees the introduction of a tiered revenue-sharing system that decreases SKO's revenue share as the volume of room nights booked increases. 

<ul><li>We are more positive on the long-term outlook for the electricity sector and upgrade Contact Energy (CEN) to OUTPERFORM and Meridian Energy (MEL) and Manawa Energy (MNW) to NEUTRAL.</li><li>Driving the more positive outlook of the sector is a view that wholesale electricity prices are likely to be higher than previously thought.</li><li>Factors behind the assumption change include stronger near-term electricity demand growth requiring more high cost baseload thermal generation for longer and the need to build generation projects higher up the demand stack. </li></ul>

We are more positive on the long-term outlook for the electricity sector and upgrade Contact Energy (CEN) to OUTPERFORM and Meridian Energy (MEL) and Manawa Energy (MNW) to NEUTRAL.Driving the more positive outlook of the sector is a view that wholesale electricity prices are likely to be higher than previously thought.Factors behind the assumption change include stronger near-term electricity demand growth requiring more high cost baseload thermal generation for longer and the need to build generation projects higher up the demand stack. 

Electricity Sector  - Demanding Some Attention — Sector Upgraded

<ul><li>Government policy changes have led to significant volatility in the types and volumes of vehicles imported recently.</li><li>New car registrations in NZ have remained subdued, falling by -20% in 1Q24, as high interest rates, more conservative lending policies, changes to EV subsidies, and increased household costs have dampened consumer demand.</li><li>However, 1Q24 saw total used car transactions begin to recover, showing a +1% increase compared to the same period in the previous year. </li></ul>

Government policy changes have led to significant volatility in the types and volumes of vehicles imported recently.New car registrations in NZ have remained subdued, falling by -20% in 1Q24, as high interest rates, more conservative lending policies, changes to EV subsidies, and increased household costs have dampened consumer demand.However, 1Q24 saw total used car transactions begin to recover, showing a +1% increase compared to the same period in the previous year. 

Forsyth Barr
New Zealand Professional Investment Services Firm

Building Sector - NZ Consents — Are We There Yet?

Residential consents were broadly flat in March. They have been range bound at 30-35k since August 2023 which is slightly below the level generally...

Forsyth Barr

The Pulse of NZ Business - Forsyth Barr Business Survey — Bifurcation

The mix of respondents are very similar to previous iterations, with a good spread across sectors and size of businesses as well as positions held...

Forsyth Barr

Serko - Re-Booking at a Lower Rate

Serko (SKO) has renewed its key partnership with Booking.com for a new five-year term, though on less favourable terms than its prior agreement.

Forsyth Barr

Electricity Sector - Demanding Some Attention — Sector Upgraded

We are more positive on the long-term outlook for the electricity sector and upgrade Contact Energy (CEN) to OUTPERFORM and Meridian Energy (MEL)...

Forsyth Barr

Forsyth Barr EV and Vehicle Digest

Government policy changes have led to significant volatility in the types and volumes of vehicles imported recently. New car registrations in NZ...

Forsyth Barr