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) further regulatory disclosures following its recent aeronautical price setting event (PSE4 for FY23–FY27) suggest lower Commerce Commission (ComCom) related regulatory re-pricing risk and higher (lower return) regulatory capex over the medium to long-term.</li><li>However, in the short-term, our capex expectations modestly decrease, leading to a lower net debt track over the next few years, resulting in lower interest costs and a reduced likelihood of a capital raise. ​​​​</li><li>While we view the disclosure release as a small positive overall for AIA, we retain an UNDERPERFORM rating on valuation grounds. </li></ul>

Auckland Airport's (AIA) further regulatory disclosures following its recent aeronautical price setting event (PSE4 for FY23–FY27) suggest lower Commerce Commission (ComCom) related regulatory re-pricing risk and higher (lower return) regulatory capex over the medium to long-term.However, in the short-term, our capex expectations modestly decrease, leading to a lower net debt track over the next few years, resulting in lower interest costs and a reduced likelihood of a capital raise. ​​​​While we view the disclosure release as a small positive overall for AIA, we retain an UNDERPERFORM rating on valuation grounds. 

Auckland Airport - Reduced Regulatory Re-Pricing Risk

<ul><li>Auckland Airport (AIA) is due to report a robust return to profitability in its FY23 result on 24 August 2023.</li><li>Management's  tendency for being conservative in its earnings guidance suggests risk of an upside surprise.</li><li>Its NPAT range is NZ$125m–NZ$145m which compares to our forecast of NZ$141m and consensus at ~NZ$142m.</li></ul>

Auckland Airport (AIA) is due to report a robust return to profitability in its FY23 result on 24 August 2023.Management's  tendency for being conservative in its earnings guidance suggests risk of an upside surprise.Its NPAT range is NZ$125m–NZ$145m which compares to our forecast of NZ$141m and consensus at ~NZ$142m.

Auckland Airport - FY23 Preview — Profits Flying Again

<ul>
<li>The Commerce Commission (ComCom) has published stakeholder submissions relating to its draft input methodologies (IMs) review report.</li>
<li>There are 55 submissions, of which 20 are primarily focussed on the draft decisions relating to airport IMs. </li>
<li>Our perusal of the submissions unsurprisingly highlights contrasting angles pursued by airports and airlines.</li>
</ul>


The Commerce Commission (ComCom) has published stakeholder submissions relating to its draft input methodologies (IMs) review report.
There are 55 submissions, of which 20 are primarily focussed on the draft decisions relating to airport IMs. 
Our perusal of the submissions unsurprisingly highlights contrasting angles pursued by airports and airlines.


Auckland Airport (AIA.NZ) - Submissions on ComCom’s IM Draft Decision

<ul><li>Aeronautical returns: AIA will continue to generate aeronautical returns in excess of its 'true market' WACC applied by the marginal investor, despite the Commerce Commission's (ComCom) potential move to lower the target returns available for airports.</li><li>RAB multiple highlights the incentive to invest: Returns in excess of cost of capital create value in most valuation frameworks</li><li>Aeronautical currently represents less than a third of group value: We expect AIA's aeronautical business to represent ~56% of group EBITDA in FY28 (once the step-up in PSE5 pricing is absorbed in earnings), but only ~33% of pre-tax earnings, given its increasing depreciation and interest burden</li></ul>

Aeronautical returns: AIA will continue to generate aeronautical returns in excess of its 'true market' WACC applied by the marginal investor, despite the Commerce Commission's (ComCom) potential move to lower the target returns available for airports.RAB multiple highlights the incentive to invest: Returns in excess of cost of capital create value in most valuation frameworksAeronautical currently represents less than a third of group value: We expect AIA's aeronautical business to represent ~56% of group EBITDA in FY28 (once the step-up in PSE5 pricing is absorbed in earnings), but only ~33% of pre-tax earnings, given its increasing depreciation and interest burden

Auckland Airport: Still Incentivised to Invest

<ul><li>Auckland Airport (AIA) has published very strong aeronautical pricing for the next four years, well above our and market expectations.</li><li>However, the level of targeted return (~8.7% vs our 7.9% assumption) for PSE4 (price setting event 4 covering FY23-FY27), which drives the pricing decision, risks the Commerce Commission’s (ComCom’s) wrath, when it reviews AIA’s pricing over the next 12 months.</li><li>Irrespective of any ComCom/government driven adjustment to pricing part way through PSE4 (as what happened through PSE3) aeronautical pricing would still be above our expectations given higher RAB growth than forecast.</li></ul>

Auckland Airport (AIA) has published very strong aeronautical pricing for the next four years, well above our and market expectations.However, the level of targeted return (~8.7% vs our 7.9% assumption) for PSE4 (price setting event 4 covering FY23-FY27), which drives the pricing decision, risks the Commerce Commission’s (ComCom’s) wrath, when it reviews AIA’s pricing over the next 12 months.Irrespective of any ComCom/government driven adjustment to pricing part way through PSE4 (as what happened through PSE3) aeronautical pricing would still be above our expectations given higher RAB growth than forecast.

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 Intl Airport (AIA NZ)

Auckland Airport - Reduced Regulatory Re-Pricing Risk

Auckland Airport's (AIA) further regulatory disclosures following its recent aeronautical price setting event (PSE4 for FY23–FY27) suggest lower...

Forsyth Barr

Auckland Airport - FY23 Preview — Profits Flying Again

Management's tendency for being conservative in its earnings guidance suggests risk of an upside surprise.Its NPAT range is NZ$125m–NZ$145m which...

Forsyth Barr

Auckland Airport (AIA.NZ) - Submissions on ComCom’s IM Draft Decision

The Commerce Commission (ComCom) has published stakeholder submissions relating to its draft input methodologies (IMs) review report.

Forsyth Barr

Auckland Airport: Still Incentivised to Invest

The value of Auckland Airport's (AIA) aeronautical business is materially higher than its regulatory asset base (RAB); The magnitude of AIA's RAB...

Forsyth Barr

Auckland Airport: Strong Aero Repricing

Auckland Airport (AIA) has published very strong aeronautical pricing for the next four years, well above our and market expectations; However, the...

Forsyth Barr

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