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>Based on the Commerce Commission's (ComCom) Mergers &amp; Acquisitions (M&amp;A) guidelines, and our analysis of the wholesale electricity market, we believe that Contact Energy's (CEN) proposed acquisition of Manawa Energy (MNW) is likely to be approved.</li><li>However, it is not a fait accompli, given the political and regulatory scrutiny the sector is currently under and the perception of reduced competition.</li><li>We lift the probability that the deal will be cleared to 70% (from 50%). </li></ul>

Based on the Commerce Commission's (ComCom) Mergers &amp; Acquisitions (M&amp;A) guidelines, and our analysis of the wholesale electricity market, we believe that Contact Energy's (CEN) proposed acquisition of Manawa Energy (MNW) is likely to be approved.However, it is not a fait accompli, given the political and regulatory scrutiny the sector is currently under and the perception of reduced competition.We lift the probability that the deal will be cleared to 70% (from 50%). 

Contact Energy - Watts on the ComCom’s Mind

Thematic (Sector/Industry)

<div><div><div><div><ul><li>The government has announced 149 projects to be included in its Fast-Track Approvals Bill, expected to pass later this year.</li><li>This has the potential to give a much needed injection of energy into the downbeat NZ economy.</li><li>Paired with all but certain continued interest rate cuts, the contours of an economic recovery are starting to take shape.</li></ul></div></div></div></div>

The government has announced 149 projects to be included in its Fast-Track Approvals Bill, expected to pass later this year.This has the potential to give a much needed injection of energy into the downbeat NZ economy.Paired with all but certain continued interest rate cuts, the contours of an economic recovery are starting to take shape.

New Zealand Moving Out of the Slow Lane - Fast-Track Approvals Welcome News

<ul><li>September 2024 was a strong month for some, but a soft month for others.</li><li>Replenishment of the hydro lakes was a welcome relief for the sector, but hedge contracts designed to protect downside risk from ongoing dry conditions has seen Meridian Energy (MEL) struggle.</li><li>Contact Energy (CEN) and Mercury (MCY) have benefitted the most in the short-term from the rapid change in conditions. </li></ul>

September 2024 was a strong month for some, but a soft month for others.Replenishment of the hydro lakes was a welcome relief for the sector, but hedge contracts designed to protect downside risk from ongoing dry conditions has seen Meridian Energy (MEL) struggle.Contact Energy (CEN) and Mercury (MCY) have benefitted the most in the short-term from the rapid change in conditions. 

Power Points - Water Works Wonders​​​​​​​ — October 2024

<ul><li>We upgrade Mercury (MCY) to OUTPERFORM from NEUTRAL, as it is offering good value relative to Meridian Energy (MEL) in particular, and we expect near-term FY25 EBITDAF earnings will be better than guidance following recent rain.</li><li>Since 2018 MEL has always traded at a premium to its peers, but is currently trading at a near record premium using our preferred EV/EBITDAF less stay-in-business (SIB) capex metric.</li><li>Looking at the three largest generator/retailers, MEL's equity value is greater than Contact Energy (CEN) and MCY combined, and yet CEN and MCY's combined businesses generate over 30% more electricity and earnings than MEL. </li></ul>

We upgrade Mercury (MCY) to OUTPERFORM from NEUTRAL, as it is offering good value relative to Meridian Energy (MEL) in particular, and we expect near-term FY25 EBITDAF earnings will be better than guidance following recent rain.Since 2018 MEL has always traded at a premium to its peers, but is currently trading at a near record premium using our preferred EV/EBITDAF less stay-in-business (SIB) capex metric.Looking at the three largest generator/retailers, MEL's equity value is greater than Contact Energy (CEN) and MCY combined, and yet CEN and MCY's combined businesses generate over 30% more electricity and earnings than MEL. 

Electricity Sector - MCY Shining Brighter Than MEL

<ul><li>Contact Energy (CEN) has made a takeover bid for Manawa Energy (MNW) at an effective price of NZ$5.95, a +48% premium to MNW's last closing price and +20% premium to our MNW valuation.</li><li>The deal makes strategic sense, but the offer price is full and will require CEN to deliver on synergy benefits to create value.</li><li>With MNW directors and major shareholders Infratil (IFT) and TECT Holdings supportive of the deal, the only hurdle of note is obtaining Commerce Commission (ComCom) clearance. </li></ul>

Contact Energy (CEN) has made a takeover bid for Manawa Energy (MNW) at an effective price of NZ$5.95, a +48% premium to MNW's last closing price and +20% premium to our MNW valuation.The deal makes strategic sense, but the offer price is full and will require CEN to deliver on synergy benefits to create value.With MNW directors and major shareholders Infratil (IFT) and TECT Holdings supportive of the deal, the only hurdle of note is obtaining Commerce Commission (ComCom) clearance. 

Contact Energy - Time to Contact the ComCom

New Zealand

Contact Energy Limited is a diversified and integrated energy company which focuses on the generation of electricity and the sale of electricity and gas in New Zealand.

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Contact Energy (CEN NZ)

Contact Energy - Watts on the ComCom’s Mind

We lift the probability that the deal will be cleared to 70% (from 50%). The ComCom is expected to release its Statement of Preliminary Issues in...

Forsyth Barr

New Zealand Moving Out of the Slow Lane - Fast-Track Approvals Welcome News

The government has announced 149 projects to be included in its Fast-Track Approvals Bill, expected to pass later this year.

Forsyth Barr

Power Points - Water Works Wonders — October 2024

These two stocks are our preferred of the large generator/retailers and along with Manawa Energy (MNW) are rated OUTPERFORM.

Forsyth Barr

Electricity Sector - MCY Shining Brighter Than MEL

MCY joins CEN and Manawa Energy (MNW) as our preferred electricity sector stocks with OUTPERFORM ratings. Genesis Energy (GNE) and MEL are rated...

Forsyth Barr

Contact Energy - Time to Contact the ComCom

Contact Energy (CEN) has made a takeover bid for Manawa Energy (MNW) at an effective price of NZ$5.95, a +48% premium to MNW's last closing price...

Forsyth Barr

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Contact Energy - Watts on the ComCom’s Mind

We lift the probability that the deal will be cleared to 70% (from 50%). The ComCom is expected to release its Statement of Preliminary Issues in...

Forsyth Barr

New Zealand Moving Out of the Slow Lane - Fast-Track Approvals Welcome News

The government has announced 149 projects to be included in its Fast-Track Approvals Bill, expected to pass later this year.

Forsyth Barr

Power Points - Water Works Wonders​​​​​​​ — October 2024

These two stocks are our preferred of the large generator/retailers and along with Manawa Energy (MNW) are rated OUTPERFORM.

Forsyth Barr

Electricity Sector - MCY Shining Brighter Than MEL

MCY joins CEN and Manawa Energy (MNW) as our preferred electricity sector stocks with OUTPERFORM ratings. Genesis Energy (GNE) and MEL are rated...

Forsyth Barr

Contact Energy - Time to Contact the ComCom

Contact Energy (CEN) has made a takeover bid for Manawa Energy (MNW) at an effective price of NZ$5.95, a +48% premium to MNW's last closing price...

Forsyth Barr

Power Points - Water Works Wonders — October 2024