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 (AIA) will likely report its strongest ever six monthly NPAT result on 20 February 2025, despite an apparent stalling of the post-COVID air travel recovery.</li><li>We forecast 1H25 NPAT of NZ$158m (up +8% on the prior year). At an EPS level, the dilution from two major capital raises (2020 and 2024) means current profitability per share still lags pre-COVID highs.</li><li>Yet, the outlook is positive given a very favourable aeronautical price path.  </li></ul>

Auckland Airport (AIA) will likely report its strongest ever six monthly NPAT result on 20 February 2025, despite an apparent stalling of the post-COVID air travel recovery.We forecast 1H25 NPAT of NZ$158m (up +8% on the prior year). At an EPS level, the dilution from two major capital raises (2020 and 2024) means current profitability per share still lags pre-COVID highs.Yet, the outlook is positive given a very favourable aeronautical price path.  

Auckland Airport - 1H25 Preview—Aero Ascent

<ul><li>The passenger (pax) recovery at Auckland Airport (AIA) has temporarily stalled; this is not news, but the recovery out of the stall is likely to be slower and longer than we previously thought.</li><li>There are several drivers. First, Air New Zealand (AIR), AIA's biggest customer, is challenged by engine maintenance issues, which is impacting aircraft availability for both domestic and international services.</li><li>Second, AIR is not the only airline impacted by maintenance and parts issues. Third, softer inbound tourism demand, with the recovery in inbound visitors lagging that of outbound Kiwis. </li></ul>

The passenger (pax) recovery at Auckland Airport (AIA) has temporarily stalled; this is not news, but the recovery out of the stall is likely to be slower and longer than we previously thought.There are several drivers. First, Air New Zealand (AIR), AIA's biggest customer, is challenged by engine maintenance issues, which is impacting aircraft availability for both domestic and international services.Second, AIR is not the only airline impacted by maintenance and parts issues. Third, softer inbound tourism demand, with the recovery in inbound visitors lagging that of outbound Kiwis. 

Auckland Airport - Slower Recovery From Stalling Pax

<ul><li>Auckland Airport's (AIA) aeronautical pricing outlook is positive, but is likely to take a short-term hit as a result of the Commerce Commission's (ComCom) ongoing PSE4 (FY23–FY27) pricing review.</li><li>We expect the latter to rule against AIA in its final report due in 1Q25, which would mean AIA lowers its pricing in FY26 and FY27.</li><li>However, perhaps more importantly for AIA, we don't expect the ComCom to raise big enough concerns about the current regulatory settings or AIA's behaviour, which would be a precursor to either it, or the government, launching an inquiry—as requested by airlines. </li></ul>

Auckland Airport's (AIA) aeronautical pricing outlook is positive, but is likely to take a short-term hit as a result of the Commerce Commission's (ComCom) ongoing PSE4 (FY23–FY27) pricing review.We expect the latter to rule against AIA in its final report due in 1Q25, which would mean AIA lowers its pricing in FY26 and FY27.However, perhaps more importantly for AIA, we don't expect the ComCom to raise big enough concerns about the current regulatory settings or AIA's behaviour, which would be a precursor to either it, or the government, launching an inquiry—as requested by airlines. 

Auckland Airport - Calibrating The (Likely) Aero Price Cut

<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

<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

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 - 1H25 Preview—Aero Ascent

Auckland Airport (AIA) will likely report its strongest ever six monthly NPAT result on 20 February 2025, despite an apparent stalling of the post...

Forsyth Barr

Auckland Airport - Slower Recovery From Stalling Pax

The passenger (pax) recovery at Auckland Airport (AIA) has temporarily stalled; this is not news, but the recovery out of the stall is likely to be...

Forsyth Barr

Auckland Airport - Calibrating The (Likely) Aero Price Cut

Auckland Airport's (AIA) aeronautical pricing outlook is positive, but is likely to take a short-term hit as a result of the Commerce Commission's...

Forsyth Barr

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

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

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