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) reported a strong 1H24 result, more than doubling the prior year NPAT, reflective of the recovery in international air travel and materially higher aeronautical prices.</li><li>However, earnings growth should slow markedly over the next 12 months as the passenger (pax) recovery has stalled, and the costs associated with its major capex programmes hit the profit and loss account as assets are commissioned. </li><li>Capex spend is at elevated levels and will remain elevated for the next few years. A capital raise is still possible, given a likely breach of S&amp;P credit metrics over the medium term, but would be well supported. </li></ul>

Auckland Airport (AIA) reported a strong 1H24 result, more than doubling the prior year NPAT, reflective of the recovery in international air travel and materially higher aeronautical prices.However, earnings growth should slow markedly over the next 12 months as the passenger (pax) recovery has stalled, and the costs associated with its major capex programmes hit the profit and loss account as assets are commissioned. Capex spend is at elevated levels and will remain elevated for the next few years. A capital raise is still possible, given a likely breach of S&amp;P credit metrics over the medium term, but would be well supported. 

Auckland Airport - 1H24 — Ascending into Regulatory Clouds

<ul><li>Air New Zealand's (AIR) official request to the Minister of Commerce, for an inquiry into the regulation of Auckland Airport (AIA), adds to the risk that the current favourable regulatory backdrop for airports changes in future.</li><li>​​​​AIA, along with Wellington and Christchurch airports, is currently subject to information disclosure within Part 4 of the Commerce Act.</li><li>AIR and other airlines would prefer the framework to incorporate negotiate/arbitrate regulation. </li></ul>

Air New Zealand's (AIR) official request to the Minister of Commerce, for an inquiry into the regulation of Auckland Airport (AIA), adds to the risk that the current favourable regulatory backdrop for airports changes in future.​​​​AIA, along with Wellington and Christchurch airports, is currently subject to information disclosure within Part 4 of the Commerce Act.AIR and other airlines would prefer the framework to incorporate negotiate/arbitrate regulation. 

Auckland Airport  - A Right Regulatory Ruck

<ul><li>Auckland Airport (AIA) is lodging an appeal with the High Court, together with Wellington and Christchurch airports, and separately via the NZ Airports Association, against the Commerce Commission's (ComCom) recent Input Methodologies (IM) decision.</li><li>Details of the appeals are not public, but given the interest and changes made by the ComCom through the IM review process last year in its assessment of the asset beta for airports, we expect this will be a key area of the appeals. </li><li>The current regulatory regime for airports is favourable for AIA, providing a high RAB (regulatory asset base) multiple (we currently assume ~2.0x) for its aeronautical assets. </li></ul>

Auckland Airport (AIA) is lodging an appeal with the High Court, together with Wellington and Christchurch airports, and separately via the NZ Airports Association, against the Commerce Commission's (ComCom) recent Input Methodologies (IM) decision.Details of the appeals are not public, but given the interest and changes made by the ComCom through the IM review process last year in its assessment of the asset beta for airports, we expect this will be a key area of the appeals. The current regulatory regime for airports is favourable for AIA, providing a high RAB (regulatory asset base) multiple (we currently assume ~2.0x) for its aeronautical assets. 

<ul><li>We expect Auckland Airport's (AIA) retail business to feature more prominently over the next 12 months, after taking a back seat through COVID and during the regulatory focus of 2023.</li><li>It's an important value driver for AIA, accounting for almost one third of NPAT and generating a very attractive return on capital.</li><li>In the decade prior to COVID retail income had grown strongly, a function of passenger (pax) growth, international departures space expansion, improving pax mix with growth in Chinese arrivals, improving concession yield and minimum annual guarantees (MAG), and the development of off-airport duty-free retail. </li></ul>

We expect Auckland Airport's (AIA) retail business to feature more prominently over the next 12 months, after taking a back seat through COVID and during the regulatory focus of 2023.It's an important value driver for AIA, accounting for almost one third of NPAT and generating a very attractive return on capital.In the decade prior to COVID retail income had grown strongly, a function of passenger (pax) growth, international departures space expansion, improving pax mix with growth in Chinese arrivals, improving concession yield and minimum annual guarantees (MAG), and the development of off-airport duty-free retail. 

<ul><li>Strong aeronautical pricing irrespective of potential reduction: AIA announced very strong aeronautical pricing for its PSE4 pricing period (FY23–FY27), which reflects a targeted post-tax return of 8.7%.</li><li>Capex drives a substantial lift in RAB: AIA's strong aeronautical price path is being driven by a major capex bulge and resultant RAB growth.</li><li>Draft input methodologies review report lowers the excess return available for airports</li></ul>

Strong aeronautical pricing irrespective of potential reduction: AIA announced very strong aeronautical pricing for its PSE4 pricing period (FY23–FY27), which reflects a targeted post-tax return of 8.7%.Capex drives a substantial lift in RAB: AIA's strong aeronautical price path is being driven by a major capex bulge and resultant RAB growth.Draft input methodologies review report lowers the excess return available for airports

Auckland Airport: The Sky Is High for Aero Pricing

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.

Auckland Intl Airport (AIA NZ)

Auckland Airport - 1H24 — Ascending into Regulatory Clouds

Auckland Airport (AIA) reported a strong 1H24 result, more than doubling the prior year NPAT, reflective of the recovery in international air...

Forsyth Barr

Auckland Airport - A Right Regulatory Ruck

AIA, along with Wellington and Christchurch airports, is currently subject to information disclosure within Part 4 of the Commerce Act.

Forsyth Barr

Auckland Airport - Reviewing the Merits

The current regulatory regime for airports is favourable for AIA, providing a high RAB (regulatory asset base) multiple (we currently assume ~2.0x)...

Forsyth Barr

Auckland Airport - Call of Duty Free

We expect Auckland Airport's (AIA) retail business to feature more prominently over the next 12 months, after taking a back seat through COVID and...

Forsyth Barr

Auckland Airport: The Sky Is High for Aero Pricing

Auckland Airport's (AIA) aeronautical pricing outlook is strong, though not as strong as its current pricing schedule suggests given the likely...

Forsyth Barr