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

<h2>Building weekly</h2>
<h3>New Zealand</h3>
<ul>
<li>Residential consents remain resilient post lockdown (Jun.): +0.5% mom, +8.4% yoy (previous +41.7% mom, +3.8% yoy) with rolling 12m total up +8% to 37.6k. Strong month for non-residential to finish a soft 1H20: value consented up +49.8% yoy with sqm +51.8% taking the past 12 months to -9% and -14% respectively.</li>
<li>Strong month for Auckland housing &nbsp;(Barfoot &amp; Thompson; Jul.): Auckland sales up +25% yoy, average/median prices resilient +6.5%/+11.2% yoy.</li>
<li>Housing inventory remains tight (<a href="http://realestate.co.nz/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://realestate.co.nz&amp;source=gmail&amp;ust=1596770941734000&amp;usg=AFQjCNHtjvgZLPhCEdl14_ahW0pSy94mtg" rel="noopener">realestate.co.nz</a>, Jul.): Auckland property inventory -6% yoy on total new listings +40%. Ex-Auckland inventory -14% yoy on new listings +11%.</li>
<li>Commercial construction regaining confidence, residential still depressed (ANZ Business Outlook, Jul.): Residential -29.0 (previous -36.4), Commercial 0.0 (previous -28.6). Own activity outlook of -10.5 suggests a slight fall in construction activity.</li>
<li>Residential pipeline starting to thin “A post-lockdown survey by the Master Builders Association shows that nearly a third of respondents had lost more than 30 per cent of their future pipeline of work, and nearly two-thirds had seen their order book shrink by more than 10 per cent.” <a href="https://www.stuff.co.nz/business/122242392/builders-starting-to-see-future-workload-tail-off" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.stuff.co.nz/business/122242392/builders-starting-to-see-future-workload-tail-off&amp;source=gmail&amp;ust=1596770941734000&amp;usg=AFQjCNH3DunoX7LTK8LqGTyh1JDII8I-6w" rel="noopener">Builders starting to see future workload tail off</a></li>
</ul>
<h3>Australia</h3>
<ul>
<li>Residential approvals in the red (Jun.): -4.9% mom, -15.8% yoy (previous -15.8% mom, -10.9% yoy) including multi-tenanted -30.2% yoy and detached dwellings -6.4%. Non-residential also soft: +17.8% mom, -9.0% yoy. Past 12 months +9% yoy</li>
<li>House prices tick down for third consecutive month (CoreLogic-RPData, capital cities, Jul.): -0.8% mom, +8.0% yoy (previous -0.9% mom, +9.0% yoy).</li>
<li>Construction activity still contracting (Performance of Construction Index, Jul.): 42.7 (previous 35.5; contraction &lt;50&lt;&nbsp;&nbsp;&nbsp;expansion) with apartments 33.9 (previous 44.8), houses 47.0 (previous 39.6), commercial 42 (previous 26.6) and engineering 45.5 (previous 32.1).</li>
<li>NSW lowers stamp duty changes for first home buyer: The stamp duty exemption limit has increased to A$800k (was A$650k) for a newly built home and a concession will cover newly built homes from A$800k-1m.</li>
<li>CIMIC highlights strong infrastructure pipeline (6M20): Group EBIT down -6% on revenue -11%, margins tick up to 8.6%. Outlook positive supported by “A$35 billion of tenders relevant to CIMIC to be bid and/or awarded during the rest of 2018; and around A$375 billion of projects coming to the market in 2019 and beyond”.</li>
</ul>
<h3>International</h3>
<ul>
<li>US: Construction activity holding steady (Jun.): Residential -1.4% mom, -0.4% yoy (previous -3.5% mom, +2.2% yoy), non-residential -0.2% mom, +0.4% yoy (previous -0.4% mom, flat yoy).</li>
<li>US: Strong home sales (Jun.): New home sales +13.8% mom, +6.9% yoy (previous +19.4% mom, +13.7% yoy). Pending home sales +16.6% mom, +6.3% yoy (previous +44.3% mom, -5.1% yoy).</li>
<li>US: Strong rebound from US’s largest homebuilder D.R. Horton (3Q): DHI reported 3Q net orders up +38% yoy and backlog up +41%, “we saw a significant increase in new home demand in May and June”. Highlighting the massive scale, DHI sold 22k houses during the quarter, and holds an inventory of 33k homes and 336k lots.</li>
</ul>
Chart of the week: NZ residential consents remain resilient post lockdown, but it is still early days
NZ Residential Building Consents
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.2&amp;permmsgid=msg-f:1674244625761231642&amp;th=173c1c9dd99ae31a&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ-gd0n-Pj2mWhiE1c3LGjPDrs8eCJUjPVhvGfgxkVRXKKcFDAr45kGbazbXmlDP9T_HH5rywhqlhNowQwukoIT2ugpg4RDEEhOpZrsMZyVqD4iFxSUnWk_yTvk&amp;disp=emb" width="453" height="303" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Source: Statistics NZ,&nbsp;Forsyth Barr analysis
Rohan Koreman-Smit&nbsp; Senior Analyst, Equities <a href="https://www.forsythbarr.co.nz/" target="_blank" rel="noopener">Forsyth Barr Limited</a>
P: +64 9 368 0085 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Building weekly
New Zealand

Residential consents remain resilient post lockdown (Jun.): +0.5% mom, +8.4% yoy (previous +41.7% mom, +3.8% yoy) with rolling 12m total up +8% to 37.6k. Strong month for non-residential to finish a soft 1H20: value consented up +49.8% yoy with sqm +51.8% taking the past 12 months to -9% and -14% respectively.
Strong month for Auckland housing &nbsp;(Barfoot &amp; Thompson; Jul.): Auckland sales up +25% yoy, average/median prices resilient +6.5%/+11.2% yoy.
Housing inventory remains tight (realestate.co.nz, Jul.): Auckland property inventory -6% yoy on total new listings +40%. Ex-Auckland inventory -14% yoy on new listings +11%.
Commercial construction regaining confidence, residential still depressed (ANZ Business Outlook, Jul.): Residential -29.0 (previous -36.4), Commercial 0.0 (previous -28.6). Own activity outlook of -10.5 suggests a slight fall in construction activity.
Residential pipeline starting to thin “A post-lockdown survey by the Master Builders Association shows that nearly a third of respondents had lost more than 30 per cent of their future pipeline of work, and nearly two-thirds had seen their order book shrink by more than 10 per cent.” Builders starting to see future workload tail off

Australia

Residential approvals in the red (Jun.): -4.9% mom, -15.8% yoy (previous -15.8% mom, -10.9% yoy) including multi-tenanted -30.2% yoy and detached dwellings -6.4%. Non-residential also soft: +17.8% mom, -9.0% yoy. Past 12 months +9% yoy
House prices tick down for third consecutive month (CoreLogic-RPData, capital cities, Jul.): -0.8% mom, +8.0% yoy (previous -0.9% mom, +9.0% yoy).
Construction activity still contracting (Performance of Construction Index, Jul.): 42.7 (previous 35.5; contraction &lt;50&lt;&nbsp;&nbsp;&nbsp;expansion) with apartments 33.9 (previous 44.8), houses 47.0 (previous 39.6), commercial 42 (previous 26.6) and engineering 45.5 (previous 32.1).
NSW lowers stamp duty changes for first home buyer: The stamp duty exemption limit has increased to A$800k (was A$650k) for a newly built home and a concession will cover newly built homes from A$800k-1m.
CIMIC highlights strong infrastructure pipeline (6M20): Group EBIT down -6% on revenue -11%, margins tick up to 8.6%. Outlook positive supported by “A$35 billion of tenders relevant to CIMIC to be bid and/or awarded during the rest of 2018; and around A$375 billion of projects coming to the market in 2019 and beyond”.

International

US: Construction activity holding steady (Jun.): Residential -1.4% mom, -0.4% yoy (previous -3.5% mom, +2.2% yoy), non-residential -0.2% mom, +0.4% yoy (previous -0.4% mom, flat yoy).
US: Strong home sales (Jun.): New home sales +13.8% mom, +6.9% yoy (previous +19.4% mom, +13.7% yoy). Pending home sales +16.6% mom, +6.3% yoy (previous +44.3% mom, -5.1% yoy).
US: Strong rebound from US’s largest homebuilder D.R. Horton (3Q): DHI reported 3Q net orders up +38% yoy and backlog up +41%, “we saw a significant increase in new home demand in May and June”. Highlighting the massive scale, DHI sold 22k houses during the quarter, and holds an inventory of 33k homes and 336k lots.

Chart of the week: NZ residential consents remain resilient post lockdown, but it is still early days
NZ Residential Building Consents

Source: Statistics NZ,&nbsp;Forsyth Barr analysis
Rohan Koreman-Smit&nbsp; Senior Analyst, Equities Forsyth Barr Limited
P: +64 9 368 0085 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

<h2>Building weekly</h2>
New Zealand
<ul>
<li>Surging new mortgage lending (Dec.): Total new mortgage lending up +22% yoy including owner-occupiers +19% and investors +37%.</li>
<li>No new year relief from tight housing inventory (<a href="http://realestate.co.nz/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://realestate.co.nz&amp;source=gmail&amp;ust=1580773218152000&amp;usg=AFQjCNFcmEr5-RLUhiI0nAUAEmcqUyQZ1Q" rel="noopener">realestate.co.nz</a>, Jan.): Auckland property inventory -23% yoy on total new listings -6%. Ex-Auckland inventory -20% yoy on new listings -2%.</li>
<li>Net migration revised lower; whilst still elevated down -35% from the 2016 peak (12 months to Nov.): +41.5k -15.7% yoy (previous +43.0k).</li>
<li>Big drop in Steel &amp; Tube’s 1H earnings: STU has guided to 1H EBIT down c.70-80% impacted by (1) a c.-10% yoy decline in revenue on the back of “reduced vertical construction work and a contraction in the stainless steel market”, and (2) previously announced NZ$2m of “Project Strive” costs (STU’s programme to improve customer service and operating efficiency) and NZ$2m in bad debts.</li>
<li>Carters to shut Whangarei sawmill: Follows recent upgrade of the Kawerau mill. <a href="https://www.stuff.co.nz/business/119009784/carter-harvey-holt-whangarei-workers-shocked-and-raw-over-potential-closure" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.stuff.co.nz/business/119009784/carter-harvey-holt-whangarei-workers-shocked-and-raw-over-potential-closure&amp;source=gmail&amp;ust=1580773218153000&amp;usg=AFQjCNHIIYKKU7xPZP25ajWMY9y8QWZRUw" rel="noopener">Carter Harvey Holt Whangarei workers 'shocked and raw' over potential closure</a></li>
<li>Government details NZ$12b infrastructure package: <a href="https://www.rnz.co.nz/news/political/408385/govt-s-12b-infrastructure-spend-rail-roads-and-dhbs-the-big-winners" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.rnz.co.nz/news/political/408385/govt-s-12b-infrastructure-spend-rail-roads-and-dhbs-the-big-winners&amp;source=gmail&amp;ust=1580773218153000&amp;usg=AFQjCNGLI56uSU60uUs0d72i6igCYXpvZg" rel="noopener">Govt's $12b infrastructure spend: Rail, roads and DHBs the big winners</a></li>
</ul>
Australia
<ul>
<li>More speculation of takeover interest in Boral: <a href="https://www.theaustralian.com.au/business/dataroom/irish-firm-crh-linked-to-boral-buyout/news-story/e6e91999832e5a250617916b69dcc217" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.theaustralian.com.au/business/dataroom/irish-firm-crh-linked-to-boral-buyout/news-story/e6e91999832e5a250617916b69dcc217&amp;source=gmail&amp;ust=1580773218153000&amp;usg=AFQjCNGbMtIsLIJHhb_ONMGqSfV51Do3Ww" rel="noopener">Irish firm CRH linked to Boral buyout</a>&nbsp;(behind a paywall) |&nbsp;<a href="https://www.globalcement.com/news/item/10345-crh-rumoured-to-be-circling-boral" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.globalcement.com/news/item/10345-crh-rumoured-to-be-circling-boral&amp;source=gmail&amp;ust=1580773218153000&amp;usg=AFQjCNG4fy1vdoutO7h7dJpoYyuIo0Fwfg" rel="noopener">CRH rumoured to be circling Boral</a></li>
</ul>
International
<ul>
<li>US: New home sales remain strongly up yoy (Dec.): -0.4% mom, +23.0% yoy (previous -1.1% mom, +13.3% yoy).</li>
<li>US: Nominal house price growth (Nov): +0.5% mom, +2.5% yoy (previous +0.5% mom, +2.2% yoy).</li>
<li>US: Homebuilders continue to benefit from strong market conditions:</li>
</ul>
-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US’s largest homebuilder D.R. Horton&nbsp;1Q new orders up +19% yoy. “We continue to see good demand and a limited supply of homes at affordable prices across our markets, and economic fundamentals and financing availability remain solid.” Highlighting the massive scale, DHI sold 58k houses during the year, and holds an inventory of 30k homes.
-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PulteGroup&nbsp;4Q19 new orders up +33% yoy. “Strong demand for new homes is benefitting from favourable market dynamics including improved affordability in part due to low mortgage rates, high employment and consumer confidence, and a generally balanced inventory of new homes”.&nbsp;
Chart of the week: Stats NZ has revised its estimate of NZ net migration. Whilst still elevated versus historic average levels, it is down by a 1/3 from its 2016 peak
New Zealand net migration vs. building consents
<figure class="editor-figure mceNonEditable"><img src="https://mail.google.com/mail/u/0?ui=2&amp;ik=f57c39853c&amp;attid=0.2&amp;permmsgid=msg-f:1657457515525552751&amp;th=170078d42b33ba6f&amp;view=fimg&amp;sz=s0-l75-ft&amp;attbid=ANGjdJ-LeIkLif5q5yTI-XXEC-SKbck_E-mqaNkQMV3UR-Qfok6Df3k70oQuFsu9YB090vJenlCYc1uMu7OOY7gs8dWYGClG369osTluBsZP97AuBl9T8MolzyJx1r8&amp;disp=emb" width="453" height="340" class="editor-image img-responsive" data-image-whitelisted=""></figure>
Source: Statistics NZ, Forsyth Barr analysis
Matt Henry &nbsp;CFA Head of Wealth Management Research Forsyth Barr Limited
P: +64 9 368 0115 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

Building weekly
New Zealand

Surging new mortgage lending (Dec.): Total new mortgage lending up +22% yoy including owner-occupiers +19% and investors +37%.
No new year relief from tight housing inventory (realestate.co.nz, Jan.): Auckland property inventory -23% yoy on total new listings -6%. Ex-Auckland inventory -20% yoy on new listings -2%.
Net migration revised lower; whilst still elevated down -35% from the 2016 peak (12 months to Nov.): +41.5k -15.7% yoy (previous +43.0k).
Big drop in Steel &amp; Tube’s 1H earnings: STU has guided to 1H EBIT down c.70-80% impacted by (1) a c.-10% yoy decline in revenue on the back of “reduced vertical construction work and a contraction in the stainless steel market”, and (2) previously announced NZ$2m of “Project Strive” costs (STU’s programme to improve customer service and operating efficiency) and NZ$2m in bad debts.
Carters to shut Whangarei sawmill: Follows recent upgrade of the Kawerau mill. Carter Harvey Holt Whangarei workers 'shocked and raw' over potential closure
Government details NZ$12b infrastructure package: Govt's $12b infrastructure spend: Rail, roads and DHBs the big winners

Australia

More speculation of takeover interest in Boral: Irish firm CRH linked to Boral buyout&nbsp;(behind a paywall) |&nbsp;CRH rumoured to be circling Boral

International

US: New home sales remain strongly up yoy (Dec.): -0.4% mom, +23.0% yoy (previous -1.1% mom, +13.3% yoy).
US: Nominal house price growth (Nov): +0.5% mom, +2.5% yoy (previous +0.5% mom, +2.2% yoy).
US: Homebuilders continue to benefit from strong market conditions:

-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;US’s largest homebuilder D.R. Horton&nbsp;1Q new orders up +19% yoy. “We continue to see good demand and a limited supply of homes at affordable prices across our markets, and economic fundamentals and financing availability remain solid.” Highlighting the massive scale, DHI sold 58k houses during the year, and holds an inventory of 30k homes.
-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PulteGroup&nbsp;4Q19 new orders up +33% yoy. “Strong demand for new homes is benefitting from favourable market dynamics including improved affordability in part due to low mortgage rates, high employment and consumer confidence, and a generally balanced inventory of new homes”.&nbsp;
Chart of the week: Stats NZ has revised its estimate of NZ net migration. Whilst still elevated versus historic average levels, it is down by a 1/3 from its 2016 peak
New Zealand net migration vs. building consents

Source: Statistics NZ, Forsyth Barr analysis
Matt Henry &nbsp;CFA Head of Wealth Management Research Forsyth Barr Limited
P: +64 9 368 0115 | TF: 0800 367 227&nbsp; Level 23, Lumley Centre, 88 Shortland Street, Auckland

United States

D.R. Horton, Inc. constructs and sells single-family homes designed primarily for the entry-level and move-up markets.  The Company operates in the Midwest, Mid-Atlantic, Southeast, Southwest, and Western regions of the United States. D.R. Horton also, through its financial services operations, provide mortgage financing and title agency services to homebuyers.

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Dr Horton Inc (DHI US)

Building Weekly

Building weekly New Zealand Residential consents remain resilient post lockdown (Jun.): +0.5% mom, +8.4% yoy (previous +41.7% mom, +3.8% yoy)...

Forsyth Barr

Building Weekly

Building weekly New Zealand Surging new mortgage lending (Dec.): Total new mortgage lending up +22% yoy including owner-occupiers +19% and...

Forsyth Barr

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