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>Fletcher Building's (FBU) FY24 result did little to ease concerns around its balance sheet.</li><li>While year end net debt was below expectations, it will rise over 1H25, despite asset sales.</li><li>Underlying demand continues to deteriorate, while new management has yet to take the helm, and unresolved, potentially large, known unknowns remain. </li></ul>

Fletcher Building's (FBU) FY24 result did little to ease concerns around its balance sheet.While year end net debt was below expectations, it will rise over 1H25, despite asset sales.Underlying demand continues to deteriorate, while new management has yet to take the helm, and unresolved, potentially large, known unknowns remain. 

Fletcher Building - FY24 Result — The Cycle Bites

<ul><li>Fletcher Building (FBU) will report its FY24 result on Wednesday, 21 August.</li><li>We expect FY24 EBIT of NZ$514m, down materially on FY23, but in the middle of FBU's guidance range of NZ$500m–$530m EBIT, which includes NZ$10m–$15m of restructuring costs.</li><li>Areas of focus will be: (1) the balance sheet given elevated debt levels, (2) an update on WA pipes and legacy construction projects, and (3) current trading and outlook comments, given slowing construction activity. </li></ul>

Fletcher Building (FBU) will report its FY24 result on Wednesday, 21 August.We expect FY24 EBIT of NZ$514m, down materially on FY23, but in the middle of FBU's guidance range of NZ$500m–$530m EBIT, which includes NZ$10m–$15m of restructuring costs.Areas of focus will be: (1) the balance sheet given elevated debt levels, (2) an update on WA pipes and legacy construction projects, and (3) current trading and outlook comments, given slowing construction activity. 

Fletcher Building - FY24 Preview — Tools Down

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<ul>
<li>The original trade was discussed at end-April in <a href="https://www.smartkarma.com/insights/tax-loss-selling-in-australia-2024-historical-analysis-and-a-trade-basket" target="_blank" data-smartkarma-citation="insights:139337" rel="noopener">Tax-Loss Selling in Australia 2024 - Historical Analysis and A Trade Basket</a> then updated <a href="https://www.smartkarma.com/insights/tax-loss-selling-in-australia-2024-a-trade-basket-updated" target="_blank" rel="noopener">here</a> and <a href="https://www.smartkarma.com/insights/tax-loss-selling-in-australia-2024-the-may-basket-april-basket-2-3-to-6-3-rtn" target="_blank" rel="noopener">here</a>. </li>
<li>That has done OK. The LIQUID basket has delta neutral performance of +8.4% over 2mos; LIQUID+LESSLIQUID +7.2%; If one did a mixed basket (3x L+LL + 1x Illiquids) it's +8.6%.</li>
<li>Now it is time to reverse the trade, buying the basket you were short, and running it against index for the next 6-8 weeks.</li>
</ul>


The original trade was discussed at end-April in Tax-Loss Selling in Australia 2024 - Historical Analysis and A Trade Basket then updated here and here. 
That has done OK. The LIQUID basket has delta neutral performance of +8.4% over 2mos; LIQUID+LESSLIQUID +7.2%; If one did a mixed basket (3x L+LL + 1x Illiquids) it's +8.6%.
Now it is time to reverse the trade, buying the basket you were short, and running it against index for the next 6-8 weeks.


Tax-Loss Selling In Australia 2024 - Time To Reverse The Trade (7.2-8.6% Rtn in Two Months So Far)

<ul><li>We lower our Fletcher Building (FBU) rating from OUTPERFORM to NEUTRAL, and reduce our 12-month target price to NZ$3.80.</li><li>There were few redeeming features in today's trading update, with the core materials and distribution businesses bearing the brunt of the cyclical downturn (although channel checks suggest more so than some peers) while the lower multiple residential development and construction divisions are faring better.</li><li>With guidance for debt to remain elevated in 2H24, questions around FBU's balance sheet linger. </li></ul>

We lower our Fletcher Building (FBU) rating from OUTPERFORM to NEUTRAL, and reduce our 12-month target price to NZ$3.80.There were few redeeming features in today's trading update, with the core materials and distribution businesses bearing the brunt of the cyclical downturn (although channel checks suggest more so than some peers) while the lower multiple residential development and construction divisions are faring better.With guidance for debt to remain elevated in 2H24, questions around FBU's balance sheet linger. 

Fletcher Building - In the Balance, Down to NEUTRAL

<ul><li>Fletcher Building's (FBU) 1H24 result and FY24 guidance was disappointing. FBU does have some good NZ businesses with strong market positions which have generated c.NZ$390m EBIT on average over the last decade.</li><li>However, group performance has been dragged down by issues in Construction and Australia. The question is: are these over?</li><li>We think it's unlikely in the short-term, with the New Zealand International Convention Centre (NZICC) still to be completed and Iplex pipe issues still unresolved. </li></ul>

Fletcher Building's (FBU) 1H24 result and FY24 guidance was disappointing. FBU does have some good NZ businesses with strong market positions which have generated c.NZ$390m EBIT on average over the last decade.However, group performance has been dragged down by issues in Construction and Australia. The question is: are these over?We think it's unlikely in the short-term, with the New Zealand International Convention Centre (NZICC) still to be completed and Iplex pipe issues still unresolved. 

Australia

Fletcher Building Limited manufactures, distributes, and sells materials for the building industry including wood fiber-based products, cement and aggregates, plasterboard, laminates, lumber, and aluminium extrusion. The Company operates primarily in New Zealand and Australia.

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Fletcher Building (FBU AU)

Fletcher Building - FY24 Result — The Cycle Bites

Looking through cyclically low near-term earnings, FBU is trading on a two-year forward PE of 11.5x, which is in line with its long run average....

Forsyth Barr

Fletcher Building - FY24 Preview — Tools Down

We expect FY24 EBIT of NZ$514m, down materially on FY23, but in the middle of FBU's guidance range of NZ$500m–$530m EBIT, which includes...

Forsyth Barr

Tax-Loss Selling In Australia 2024 - Time To Reverse The Trade (7.2-8.6% Rtn in Two Months So Far)

Many of the stocks in the most beaten-down list are Australia-listed lithium producers. Some down today. Others in Asia are down today too. If one...

Travis Lundy

Fletcher Building - In the Balance, Down to NEUTRAL

We lower our Fletcher Building (FBU) rating from OUTPERFORM to NEUTRAL, and reduce our 12-month target price to NZ$3.80. There were few redeeming...

Forsyth Barr

Fletcher Building - A House Under Repair

Fletcher Building's (FBU) 1H24 result and FY24 guidance was disappointing. FBU does have some good NZ businesses with strong market positions...

Forsyth Barr

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