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.

Equity Bottom-Up

<ul><li>Air New Zealand (AIR) reported a strong FY23 result, boosted by record passenger yields. It was far from a normal year, AIR fairly labels it an "extraordinary operating environment"; consequently, the result offers few signals as to profit levels for the year ahead.</li><li>The airline's financial backdrop is slowly moving towards the new norm where both costs and yields are materially higher than pre-COVID levels.</li><li>We expect this differential to allow AIR to generate an attractive ROIC in FY24, but lower than FY23, and heading back towards WACC over the medium-term. Trading at ~8x one year forward PE, AIR continues to trade at a material premium (~25%) to Tasman peer Qantas (QAN.AX). ​​​​​​​NEUTRAL.</li></ul>

Air New Zealand (AIR) reported a strong FY23 result, boosted by record passenger yields. It was far from a normal year, AIR fairly labels it an "extraordinary operating environment"; consequently, the result offers few signals as to profit levels for the year ahead.The airline's financial backdrop is slowly moving towards the new norm where both costs and yields are materially higher than pre-COVID levels.We expect this differential to allow AIR to generate an attractive ROIC in FY24, but lower than FY23, and heading back towards WACC over the medium-term. Trading at ~8x one year forward PE, AIR continues to trade at a material premium (~25%) to Tasman peer Qantas (QAN.AX). ​​​​​​​NEUTRAL.

Air New Zealand - FY23 — Steep Ascent, Descending to Lower Altitude

<ul><li>Air New Zealand (AIR) will report its second highest annual profit when it reports its FY23 result on 24 August 2023.</li><li>Successive earnings guidance upgrades during the year leaves underlying PBT at more than NZ$580m (FB: NZ$591m).</li><li>Strong margins have been driven by yield strength as demand remains greater than supply, with easing fuel prices more than mitigating elevated cost inflation and lower cargo revenues.  </li></ul>

Air New Zealand (AIR) will report its second highest annual profit when it reports its FY23 result on 24 August 2023.Successive earnings guidance upgrades during the year leaves underlying PBT at more than NZ$580m (FB: NZ$591m).Strong margins have been driven by yield strength as demand remains greater than supply, with easing fuel prices more than mitigating elevated cost inflation and lower cargo revenues.  

Air New Zealand - FY23 Preview — On Top of the World

<ul><li>Earnings drive share price performance: AIR's share price has historically been very responsive to changes in medium-term earnings expectations. </li><li>The trend is your friend; earnings momentum has been strong </li><li>Demand surprising to the upside: AIR's strong demand recovery is consistent with that experienced internationally. </li></ul>

Earnings drive share price performance: AIR's share price has historically been very responsive to changes in medium-term earnings expectations. The trend is your friend; earnings momentum has been strong Demand surprising to the upside: AIR's strong demand recovery is consistent with that experienced internationally. 

<ul><li>Demand remains robust: AIR will finish FY23 stronger than it had expected when it provided guidance at its 1H23 result in February 2023 and its more recent update in late April 2023</li><li>Softer oil prices supportive: Lower oil prices have bolstered late-FY23 profitability and will help mitigate the impact of lower yields through FY24</li><li>Other cost pressures persist: While oil prices trend lower, other operating costs continue to rise. Staff costs are increasing due to headcount and wages</li></ul>

Demand remains robust: AIR will finish FY23 stronger than it had expected when it provided guidance at its 1H23 result in February 2023 and its more recent update in late April 2023Softer oil prices supportive: Lower oil prices have bolstered late-FY23 profitability and will help mitigate the impact of lower yields through FY24Other cost pressures persist: While oil prices trend lower, other operating costs continue to rise. Staff costs are increasing due to headcount and wages

<ul><li>Air New Zealand (AIR) has lifted its FY23 profit before tax guidance again to “no less than NZ$580m” from a prior range of NZ$510m-NZ$560m (that was upgraded in late April 2023 from NZ$450m–NZ$530m).</li><li>The upgrade reflects (1) stronger ongoing demand than is typical during its low season and (2) lower oil prices. Revised guidance compares to Visible Alpha consensus of NZ$546m and our estimate of NZ$553m.</li><li>The outlook for FY24 continues to be relatively uncertain despite robust forward bookings and lower oil prices</li></ul>

Air New Zealand (AIR) has lifted its FY23 profit before tax guidance again to “no less than NZ$580m” from a prior range of NZ$510m-NZ$560m (that was upgraded in late April 2023 from NZ$450m–NZ$530m).The upgrade reflects (1) stronger ongoing demand than is typical during its low season and (2) lower oil prices. Revised guidance compares to Visible Alpha consensus of NZ$546m and our estimate of NZ$553m.The outlook for FY24 continues to be relatively uncertain despite robust forward bookings and lower oil prices

New Zealand

Air New Zealand Limited operates an airline business that provides international and domestic air passenger and cargo transport services throughout New Zealand and the South West Pacific. The Company also provides engineering and ground handling services.

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Air New Zealand (AIR NZ)

Air New Zealand - FY23 — Steep Ascent, Descending to Lower Altitude

The airline's financial backdrop is slowly moving towards the new norm where both costs and yields are materially higher than pre-COVID levels.

Forsyth Barr

Air New Zealand - FY23 Preview — On Top of the World

Strong margins have been driven by yield strength as demand remains greater than supply, with easing fuel prices more than mitigating elevated cost...

Forsyth Barr

Air New Zealand: Cruise Altitude

Air New Zealand's (AIR) share price has been unusually stable despite recovering from the major shock of the pandemic, with near-term earnings...

Forsyth Barr

Air New Zealand: In a Holding Pattern

Air New Zealand's (AIR) recent profit upgrade, together with International Air Transport Association (IATA) commentary, highlights strong tailwinds...

Forsyth Barr

Air New Zealand: Another Profit Upgrade

Air New Zealand (AIR) has lifted its FY23 profit before tax guidance again to “no less than NZ$580m” from a prior range of NZ$510m-NZ$560m (that...

Forsyth Barr

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