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>In contrast, MFT's very strong 1H23 provisional result and bullish investor day commentary highlight further customer wins, strong momentum in network development, and margin improvement strategies across its three core products, particularly Air &amp; Ocean (A&amp;O).</li><li>We broadly reverse our downgrades from last week, but more importantly accept a higher level of sustainability within current A&amp;O profits and higher customer win driven growth over the medium term, despite cyclical risks.</li><li>MFT now trades on ~16x PE on our revised earnings estimates, which more than compensates investors for current A&amp;O over-earning.</li></ul>

In contrast, MFT's very strong 1H23 provisional result and bullish investor day commentary highlight further customer wins, strong momentum in network development, and margin improvement strategies across its three core products, particularly Air &amp; Ocean (A&amp;O).We broadly reverse our downgrades from last week, but more importantly accept a higher level of sustainability within current A&amp;O profits and higher customer win driven growth over the medium term, despite cyclical risks.MFT now trades on ~16x PE on our revised earnings estimates, which more than compensates investors for current A&amp;O over-earning.

Mainfreight: Blue Blood Transfusion; Upgrade to OUTPERFORM

<ul><li>Mainfreight (MFT) is not immune to the current challenges facing the global freight sector</li><li>We expect earnings growth to slow through FY23, from very high levels following an excellent first four months, as rapidly declining sea freight rates dampen its Air &amp; Ocean (A&amp;O)  segment profitability</li><li>Momentum in Transport and Warehousing has been impressive, highlighting MFT's competitive advantage and favourable growth characteristics</li></ul>

Mainfreight (MFT) is not immune to the current challenges facing the global freight sectorWe expect earnings growth to slow through FY23, from very high levels following an excellent first four months, as rapidly declining sea freight rates dampen its Air &amp; Ocean (A&amp;O)  segment profitabilityMomentum in Transport and Warehousing has been impressive, highlighting MFT's competitive advantage and favourable growth characteristics

Mainfreight: Tide Going Out on Sea Freight Rates

Thematic (Sector/Industry)

<ul><li>Freightways (FRE): We are attracted to FRE due to (1) the strength of new customer, (2) further pricing for effort opportunities, and (3) the disciplined expansion into the Australian express freight market</li><li>Mainfreight (MFT): MFT is a high quality business with a proven track record for growth</li><li>Port of Tauranga (POT): POT offers attractive defensive characteristics in the current environment</li></ul>

Freightways (FRE): We are attracted to FRE due to (1) the strength of new customer, (2) further pricing for effort opportunities, and (3) the disciplined expansion into the Australian express freight marketMainfreight (MFT): MFT is a high quality business with a proven track record for growthPort of Tauranga (POT): POT offers attractive defensive characteristics in the current environment

<ul><li>Pressure on container rates continues: Container shipping spot rates have declined significantly since their peak in September 2021</li><li>Peers upgrade cycle slowing: MFT enjoyed a further step-up in consensus earnings following its annual shareholder meeting (ASM) in late July 2022</li><li>Base business growing: Transport performance through early FY23 has been strong as signalled at the ASM</li></ul>

Pressure on container rates continues: Container shipping spot rates have declined significantly since their peak in September 2021Peers upgrade cycle slowing: MFT enjoyed a further step-up in consensus earnings following its annual shareholder meeting (ASM) in late July 2022Base business growing: Transport performance through early FY23 has been strong as signalled at the ASM

Mainfreight: Supercycle Tailwinds Gradually Ebbing

<ul><li>Air &amp; sea freight rates benefit has peaked: Freight industry growth rates continue to be dominated by air and sea freight forwarding, driven by the freight rate super-cycle</li><li>Impressive margin expansion in LTL: LTL sector is enjoying impressive margin expansion as industry rates (particularly in the US market) are more than offsetting higher cost inflation</li><li>Warehousing growth more subdued: Warehousing sector momentum is positive, though growth rates are less impressive than in other freight segments</li></ul>

Air &amp; sea freight rates benefit has peaked: Freight industry growth rates continue to be dominated by air and sea freight forwarding, driven by the freight rate super-cycleImpressive margin expansion in LTL: LTL sector is enjoying impressive margin expansion as industry rates (particularly in the US market) are more than offsetting higher cost inflationWarehousing growth more subdued: Warehousing sector momentum is positive, though growth rates are less impressive than in other freight segments

Mainfreight: Peers Suggest Peak Growth in Rear View Mirror

New Zealand

Mainfreight Limited provides and supplies freight, warehousing and logistics services throughout New Zealand and Australia.  The Company provides freight forwarding services by road, rail, sea and air along with providing international freight forwarding services, customs clearance services and specialized handling of hazardous substances.

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Mainfreight Ltd (MFT NZ)

Mainfreight: Blue Blood Transfusion; Upgrade to OUTPERFORM

MFT's very strong 1H23 provisional result and bullish investor day commentary highlight further customer wins, strong momentum in network development

Forsyth Barr

Mainfreight: Tide Going Out on Sea Freight Rates

Mainfreight (MFT) is not immune to the current challenges facing the global freight sector; We expect earnings growth to slow through FY23, from...

Forsyth Barr

Transport Trends: Mixed Bag

The post-pandemic world is a mixed bag for the transport sector: aviation is enjoying an expected and much needed resurgence; global airfreight...

Forsyth Barr

Mainfreight: Supercycle Tailwinds Gradually Ebbing

The fragmented nature of Mainfreight's (MFT) customer base and its strong ability to add new ones means there is a high dependency on faith based...

Forsyth Barr

Mainfreight: Peers Suggest Peak Growth in Rear View Mirror

Mainfreight's (MFT) closest global freight peers enjoyed another strong quarter through 2Q22, with well above trend revenue growth and impressive...

Forsyth Barr

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