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>Auckland Airport's (AIA) NZ$1.4bn equity raise to support its capital development programme suggests a conservative approach to managing its balance sheet.</li><li>The additional equity should mean AIA navigates the bulge of capital expansion over the medium term, without getting close to testing its key S&amp;P A- credit rating of funds from operations (FFO) to debt threshold, even with the prospect of aeronautical price cuts in FY26 and FY27.</li><li>The latter stems from the current Commerce Commission (ComCom) PSE4 (FY23–FY27) pricing review. </li></ul>

Auckland Airport's (AIA) NZ$1.4bn equity raise to support its capital development programme suggests a conservative approach to managing its balance sheet.The additional equity should mean AIA navigates the bulge of capital expansion over the medium term, without getting close to testing its key S&amp;P A- credit rating of funds from operations (FFO) to debt threshold, even with the prospect of aeronautical price cuts in FY26 and FY27.The latter stems from the current Commerce Commission (ComCom) PSE4 (FY23–FY27) pricing review. 

Auckland Airport - Funding Terminal Value

Thematic (Sector/Industry)

<ul><li>Domestic transport, be it freight or passenger, is currently feeling pretty sorry for itself.</li><li>The depressed economic backdrop at home and stalled recovery of inbound air travel is weighing on the sector’s psyche and financial performance.</li><li>At this stage of the cycle, we tender to look for anything vaguely resembling a green shoot. </li></ul>

Domestic transport, be it freight or passenger, is currently feeling pretty sorry for itself.The depressed economic backdrop at home and stalled recovery of inbound air travel is weighing on the sector’s psyche and financial performance.At this stage of the cycle, we tender to look for anything vaguely resembling a green shoot. 

Transport Trends - Green Shoots Yet to Germinate

<ul><li>We upgrade our rating on ​​​​​​​Auckland Airport (AIA) to NEUTRAL from UNDERPERFORM due to: (1) earnings upgrades following the FY24 result, (2) reduced regulatory risk following the Commerce Commission's (ComCom) recent interim report on AIA's aeronautical pricing (PSE4), and (3) recent relative share price underperformance, despite softening bond rates. AIA's FY24 result was broadly in line with market expectations, though first time FY25 earnings guidance leads us to materially lift our NPAT estimates, despite only marginal increases in operating income.</li><li>The pax recovery may be lagging, but the earnings recovery remains in full swing. Both FY24 EBITDA and NPAT are above FY19 levels.</li><li>AIA currently trades at ~20x one year forward EV/EBITDA and ~36x PE. Its valuation premium, relative to the domestic market and other infrastructure players, remains above historical levels (justified by a higher RAB and valuation multiple, now applicable for its aeronautical assets), but has retreated to levels that we are more comfortable with.  </li></ul>

We upgrade our rating on ​​​​​​​Auckland Airport (AIA) to NEUTRAL from UNDERPERFORM due to: (1) earnings upgrades following the FY24 result, (2) reduced regulatory risk following the Commerce Commission's (ComCom) recent interim report on AIA's aeronautical pricing (PSE4), and (3) recent relative share price underperformance, despite softening bond rates. AIA's FY24 result was broadly in line with market expectations, though first time FY25 earnings guidance leads us to materially lift our NPAT estimates, despite only marginal increases in operating income.The pax recovery may be lagging, but the earnings recovery remains in full swing. Both FY24 EBITDA and NPAT are above FY19 levels.AIA currently trades at ~20x one year forward EV/EBITDA and ~36x PE. Its valuation premium, relative to the domestic market and other infrastructure players, remains above historical levels (justified by a higher RAB and valuation multiple, now applicable for its aeronautical assets), but has retreated to levels that we are more comfortable with.  

Auckland Airport - FY24 — Capex Has Taken-Off

<ul><li>Auckland Airport (AIA) will report further progress in its post-COVID recovery when its releases its FY24 result on 22 August 2024.</li><li>Better retail yields and continued robust progress in investment property should compensate for lower-than-anticipated pax, with AIA likely to report underlying NPAT comfortably within its NZ$260m–NZ$280m guidance range.</li><li>However, first time guidance for FY25 may underwhelm, despite favourable aeronautical pricing (with potential price cuts due from FY26), given a constrained airline capacity outlook and the rapidly rising P&amp;L costs of depreciation and interest. </li></ul>

Auckland Airport (AIA) will report further progress in its post-COVID recovery when its releases its FY24 result on 22 August 2024.Better retail yields and continued robust progress in investment property should compensate for lower-than-anticipated pax, with AIA likely to report underlying NPAT comfortably within its NZ$260m–NZ$280m guidance range.However, first time guidance for FY25 may underwhelm, despite favourable aeronautical pricing (with potential price cuts due from FY26), given a constrained airline capacity outlook and the rapidly rising P&amp;L costs of depreciation and interest. 

Auckland Airport - FY24 Preview — Final Approach

<ul><li>Mega trends have been dictating transport sector performance over the last few years.</li><li>The pandemic saw international travel halt overnight, congested supply chains, and ripples sent across the broader freight sector.</li><li>Just as these trends began to normalise, global economic conditions started to deteriorate, leading to supply chain destocking, and weaker passenger and freight end demand. </li></ul>

Mega trends have been dictating transport sector performance over the last few years.The pandemic saw international travel halt overnight, congested supply chains, and ripples sent across the broader freight sector.Just as these trends began to normalise, global economic conditions started to deteriorate, leading to supply chain destocking, and weaker passenger and freight end demand. 

New Zealand

Auckland International Airport Limited owns and operates the Auckland International Airport.  The Airport includes a single runway, an international terminal and two domestic terminals.  The Airport also has commercial facilities which includes airfreight operations, car rental services, commercial banking center and office buildings.

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Auckland International Airport (AIA AU)

Auckland Airport - Funding Terminal Value

Auckland Airport's (AIA) NZ$1.4bn equity raise to support its capital development programme suggests a conservative approach to managing its...

Forsyth Barr

Transport Trends - Green Shoots Yet to Germinate

The depressed economic backdrop at home and stalled recovery of inbound air travel is weighing on the sector’s psyche and financial performance.

Forsyth Barr

Auckland Airport - FY24 — Capex Has Taken-Off

The pax recovery may be lagging, but the earnings recovery remains in full swing. Both FY24 EBITDA and NPAT are above FY19 levels.

Forsyth Barr

Auckland Airport - FY24 Preview — Final Approach

Auckland Airport (AIA) will report further progress in its post-COVID recovery when its releases its FY24 result on 22 August 2024.

Forsyth Barr

Transport Trends - A Second Wave

Mega trends have been dictating transport sector performance over the last few years. The pandemic saw international travel halt overnight,...

Forsyth Barr

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