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>Following our scenarios to assess the impact of the Chemist Warehouse (CW) contract loss in FY25, we walk away with increased comfort that EBO can navigate the loss without significant downside to current FY25 consensus expectations.</li><li>Representing only ~2% of EBO's group EBIT, we also think EBO should be able to absorb the loss of NZ CW supply contract which ends in 1H27 (should the recent competition changes drive this outcome).</li><li>In combination, our analysis provides increased confidence in the earnings outlook, however, we continue to see valuation as elevated in relative and absolute terms (even reflecting EBO's execution and change in business mix). Retain NEUTRAL. </li></ul>

Following our scenarios to assess the impact of the Chemist Warehouse (CW) contract loss in FY25, we walk away with increased comfort that EBO can navigate the loss without significant downside to current FY25 consensus expectations.Representing only ~2% of EBO's group EBIT, we also think EBO should be able to absorb the loss of NZ CW supply contract which ends in 1H27 (should the recent competition changes drive this outcome).In combination, our analysis provides increased confidence in the earnings outlook, however, we continue to see valuation as elevated in relative and absolute terms (even reflecting EBO's execution and change in business mix). Retain NEUTRAL. 

<ul><li>EBOS Group's (EBO) 1H24 result was solid. Importantly, (1) EBO's pharmacy performance and commentary should help allay fears around deteriorating industry dynamics, and (2) EBO continues to see solid cost-out opportunities.</li><li>While broader business trends remain constructive, EBO is trading on a FY25 PE of ~22x, modestly ahead of its 10 year average, and a ~+30% premium to the market median.</li><li>We back management to negate the possible negative operating leverage (EBO has several levers it can pull), but FY25 earnings are not risk-free as EBO transitions through the Chemist Warehouse (CW) contract loss. </li></ul>

EBOS Group's (EBO) 1H24 result was solid. Importantly, (1) EBO's pharmacy performance and commentary should help allay fears around deteriorating industry dynamics, and (2) EBO continues to see solid cost-out opportunities.While broader business trends remain constructive, EBO is trading on a FY25 PE of ~22x, modestly ahead of its 10 year average, and a ~+30% premium to the market median.We back management to negate the possible negative operating leverage (EBO has several levers it can pull), but FY25 earnings are not risk-free as EBO transitions through the Chemist Warehouse (CW) contract loss. 

EBOS Group - 1H24 Result — In Good Health

<ul><li>With the first four months of trading already released, it is unlikely that EBOS Group's (EBO) 1H24 result will surprise.</li><li>We expect it to be a typically solid result. Key focus areas are: (1) cost out initiatives in light of the pending Chemist Warehouse (CW) contract loss (or at least commentary on the outlook), (2) pharmacy industry dynamics, and (3) M&amp;A outlook/strategy in light of the considered Greencross deal in November.</li></ul>

With the first four months of trading already released, it is unlikely that EBOS Group's (EBO) 1H24 result will surprise.We expect it to be a typically solid result. Key focus areas are: (1) cost out initiatives in light of the pending Chemist Warehouse (CW) contract loss (or at least commentary on the outlook), (2) pharmacy industry dynamics, and (3) M&amp;A outlook/strategy in light of the considered Greencross deal in November.

EBOS Group - 1H24 Preview — Costs & Chemist Warehouse

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>Privately-Held Chemist Warehouse’s (CWG) “transformational merger” with pharmaceutical wholesaler and franchisor <strong><a href="https://www.smartkarma.com/entities/sigma-healthcare-ltd" target="_blank" data-smartkarma-citation="entities:15966:1" rel="noopener">Sigma Healthcare (SIG AU)</a></strong> will result in CWG's shareholders holding 85.75% of the merged company. </li>
<li>CWG shareholders will receive A$700mn in cash plus new Sigma shares. Sigma will also undertake a $400mn equity raising to fund working capital needs.</li>
<li>Sigma has the backing of its largest shareholder HMC. The risk to completion pivots off ACCC approval. </li>
</ul>


Privately-Held Chemist Warehouse’s (CWG) “transformational merger” with pharmaceutical wholesaler and franchisor Sigma Healthcare (SIG AU) will result in CWG's shareholders holding 85.75% of the merged company. 
CWG shareholders will receive A$700mn in cash plus new Sigma shares. Sigma will also undertake a $400mn equity raising to fund working capital needs.
Sigma has the backing of its largest shareholder HMC. The risk to completion pivots off ACCC approval. 


Sigma Healthcare (SIG AU): Chemist Warehouse's Reverse Takeover

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>
<a href="https://www.smartkarma.com/entities/gentrack-group-ltd" target="_blank" data-smartkarma-citation="entities:2752:1" rel="noopener">Gentrack (GTK NZ)</a> and <a href="https://www.smartkarma.com/entities/dorchester-pacific-ltd" target="_blank" data-smartkarma-citation="entities:1854:1" rel="noopener">Turners Automotive (TRA NZ)</a> will be added to the S&amp;P/NZX 50 Index while <a href="https://www.smartkarma.com/entities/synlait-milk-ltd" target="_blank" data-smartkarma-citation="entities:16298:1" rel="noopener">Synlait Milk (SML NZ)</a> and <a href="https://www.smartkarma.com/entities/pacific-edge-ltd" target="_blank" data-smartkarma-citation="entities:20261:1" rel="noopener">Pacific Edge (PEB NZ)</a> will be deleted.</li>
<li>There is a lot to trade on the stocks. The impact in terms of days of ADV appears high but historically there has been volume on implementation date.</li>
<li>The adds have jumped recently and there will be pre-positioning on the stocks. Not so much on the deletes.</li>
</ul>



Gentrack (GTK NZ) and Turners Automotive (TRA NZ) will be added to the S&amp;P/NZX 50 Index while Synlait Milk (SML NZ) and Pacific Edge (PEB NZ) will be deleted.
There is a lot to trade on the stocks. The impact in terms of days of ADV appears high but historically there has been volume on implementation date.
The adds have jumped recently and there will be pre-positioning on the stocks. Not so much on the deletes.


S&P/NZX 50 Index Rebalance: Two High Impact Changes Coming Up

Australia

EBOS Group Limited supplies and distributes medical consumable products and equipment to the hospital and primary care sectors of the New Zealand and Australian healthcare markets. The Company's products include diagnostic instruments, surgical instruments and prosthesis, feminine protection, anesthetic equipment, and other consumer products.

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EBOS Group (EBO AU)

EBOS Group - The Final CW Check-Up

Following our scenarios to assess the impact of the Chemist Warehouse (CW) contract loss in FY25, we walk away with increased comfort that EBO can...

Forsyth Barr

EBOS Group - 1H24 Result — In Good Health

While broader business trends remain constructive, EBO is trading on a FY25 PE of ~22x, modestly ahead of its 10 year average, and a ~+30% premium...

Forsyth Barr

EBOS Group - 1H24 Preview — Costs & Chemist Warehouse

With the first four months of trading already released, it is unlikely that EBOS Group's (EBO) 1H24 result will surprise. We expect it to be a...

Forsyth Barr

Sigma Healthcare (SIG AU): Chemist Warehouse's Reverse Takeover

Sigma's shares resumed this morning after raising $178mn from institutional partners to support its merger with Chemist Warehouse – and are up 41%...

David Blennerhassett

S&P/NZX 50 Index Rebalance: Two High Impact Changes Coming Up

As expected, Gentrack and Turners Auto will replace Synlait Milk and Pacific Edge in the NZX50 Index. The adds have jumped recently and there...

Brian Freitas

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