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>Lingering cost pressures delaying margin recovery: FRW's pricing power has been a key driver of its business model in recent years supported by rational competitor behaviour in the core NZ parcels market. </li><li>Volume risks apparent: FRW is not immune to the economic cycle</li><li>M&amp;A is the known unknown: Management's track record in driving value and earnings accretion through acquisitions was boosted by the favourable Big Chill deal (completed in early 2020).</li></ul>

Lingering cost pressures delaying margin recovery: FRW's pricing power has been a key driver of its business model in recent years supported by rational competitor behaviour in the core NZ parcels market. Volume risks apparent: FRW is not immune to the economic cycleM&amp;A is the known unknown: Management's track record in driving value and earnings accretion through acquisitions was boosted by the favourable Big Chill deal (completed in early 2020).

Freightways: Untimely Delivery of Economic Challenges

<ul><li>Freightways (FRW) will incur a number of additional costs through 2H23 that will dampen FY23 margins.</li><li>These relate to (1) the recent floods, (2) its upcoming ASX listing, and (3) aircraft lease costs for its express overnight network.</li><li>The majority of these costs are temporary in nature and not recoverable by price increases.</li></ul>

Freightways (FRW) will incur a number of additional costs through 2H23 that will dampen FY23 margins.These relate to (1) the recent floods, (2) its upcoming ASX listing, and (3) aircraft lease costs for its express overnight network.The majority of these costs are temporary in nature and not recoverable by price increases.

Freightways: 2H23 Margins to Be Impacted by One-Off Costs

<ul><li>The earnings downgrade cycle at Freightways (FRW) is continuing, though the drivers outlined in its trading update reflect more temporary rather than structural cost related headwinds.</li><li>Moreover, volume comparatives ease in 4Q23 following the cycling of Omicron impacted 3Q22, where residential parcel volumes were elevated.</li><li>We retain an OUTPERFORM rating in light of (1) medium to long-term organic growth potential, (2) the scope for accretive acquisitions, and (3) a one year forward PE multiple discount to the NZX50.</li></ul>

The earnings downgrade cycle at Freightways (FRW) is continuing, though the drivers outlined in its trading update reflect more temporary rather than structural cost related headwinds.Moreover, volume comparatives ease in 4Q23 following the cycling of Omicron impacted 3Q22, where residential parcel volumes were elevated.We retain an OUTPERFORM rating in light of (1) medium to long-term organic growth potential, (2) the scope for accretive acquisitions, and (3) a one year forward PE multiple discount to the NZX50.

Thematic (Sector/Industry)

<ul><li>The wider transport industry is normalising, albeit at different rates, after three years of extreme influences</li><li>The most negatively impacted were the airlines, yet they’ve been quick to return to strong levels of profitability thanks to record yields as industry capacity has been slow to return.</li><li>The most positively impacted through COVID were the shipping lines, followed by freight forwarders, both benefitting from excessive shipping rates due to industry congestion, reducing available capacity.</li></ul>

The wider transport industry is normalising, albeit at different rates, after three years of extreme influencesThe most negatively impacted were the airlines, yet they’ve been quick to return to strong levels of profitability thanks to record yields as industry capacity has been slow to return.The most positively impacted through COVID were the shipping lines, followed by freight forwarders, both benefitting from excessive shipping rates due to industry congestion, reducing available capacity.

<ul><li>Cautious outlook; a more resilient business: FRE has seen few signs of a slowing domestic economy but is wary that conditions may deteriorate over the next six months</li><li>Margin slippage; mix helps explain: The 1H23 result shows a continuation of FRE's margin compression trend over the past five to ten years</li><li>Another good deal in Allied Express</li></ul>

Cautious outlook; a more resilient business: FRE has seen few signs of a slowing domestic economy but is wary that conditions may deteriorate over the next six monthsMargin slippage; mix helps explain: The 1H23 result shows a continuation of FRE's margin compression trend over the past five to ten yearsAnother good deal in Allied Express

Freightways: 1H23 — Touching the Brakes

New Zealand

Freightways Limited provides express package services throughout New Zealand along with providing information management and business mail services.  The Company's courier services includes same day and overnight national and international deliveries, freight forwarding services, computer media transport and payroll data deliveries.

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Freightways Ltd (FRE NZ)

Freightways: Untimely Delivery of Economic Challenges

We lower our rating on Freightways (FRW) to NEUTRAL from OUTPERFORM to reflect lingering cost and volume headwinds; FRW is better equipped to trade...

Forsyth Barr

Freightways: 2H23 Margins to Be Impacted by One-Off Costs

Freightways (FRW) will incur a number of additional costs through 2H23 that will dampen FY23 margins; these relate to (1) the recent floods, (2)...

Forsyth Barr

Freightways: One-Offs to Weigh on 2H23

The earnings downgrade cycle at Freightways (FRW) is continuing, though the drivers outlined in its trading update reflect more temporary rather...

Forsyth Barr

Transport Trends: Reverting to the Mean

The wider transport industry is normalising, albeit at different rates, after three years of extreme influences; the most negatively impacted were...

Forsyth Barr

Freightways: 1H23 — Touching the Brakes

Freightways (FRE) reported a solid 1H23 result characterised by strategic growth but margin pressure; FRE is trading at ~17x one year forward PE, a...

Forsyth Barr

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