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>Meridian Energy (MEL) delivered a record 1H24 operating result for its New Zealand operations, with strong retail margin growth underpinning the increase in earnings.</li><li>Whilst ongoing opex challenges took some of the shine off, the outlook for the remainder of FY24 is positive as MEL and the rest of the industry await the NZAS decision (which will hopefully be in the next few months).</li><li>Forecasts, target price, and our investment view are little changed. UNDERPERFORM.</li></ul>

Meridian Energy (MEL) delivered a record 1H24 operating result for its New Zealand operations, with strong retail margin growth underpinning the increase in earnings.Whilst ongoing opex challenges took some of the shine off, the outlook for the remainder of FY24 is positive as MEL and the rest of the industry await the NZAS decision (which will hopefully be in the next few months).Forecasts, target price, and our investment view are little changed. UNDERPERFORM.

Meridian Energy - Sun Shines on Electrification — 1H24 Result

Thematic (Sector/Industry)

<ul><li>For the first time in three years we are moving our WACC assumptions down.</li><li>This is driven by a modestly lower (-25 bps) interpolated 10-year interest rate assumption; our proxy for the risk free rate.</li><li>We also incorporate our C&amp;ESG ratings into our WACC assumptions. We do this on an overall neutral basis, with a scale of -25 bps to +25 bps added to the cost of equity. </li></ul>

For the first time in three years we are moving our WACC assumptions down.This is driven by a modestly lower (-25 bps) interpolated 10-year interest rate assumption; our proxy for the risk free rate.We also incorporate our C&amp;ESG ratings into our WACC assumptions. We do this on an overall neutral basis, with a scale of -25 bps to +25 bps added to the cost of equity. 

Equity Strategy - WACC Review; a Lower Rfr and Adding C&ESG

<ul><li>January 2024 saw a good top-up of hydro lakes, easing near-term hydro generation concerns, strong electricity demand growth and EV sales collapsing to pre-Clean Car Discount levels.</li><li>Share price performance was subdued, with two stocks outperforming and three underperforming.</li><li>We continue to view the sector as expensive with the Electricity Authority’s (EA) generation development survey indicating more solar projects are being built (or are about to be built) than has been publicly announced, suggesting a short-term overbuild risk is real.</li></ul>

January 2024 saw a good top-up of hydro lakes, easing near-term hydro generation concerns, strong electricity demand growth and EV sales collapsing to pre-Clean Car Discount levels.Share price performance was subdued, with two stocks outperforming and three underperforming.We continue to view the sector as expensive with the Electricity Authority’s (EA) generation development survey indicating more solar projects are being built (or are about to be built) than has been publicly announced, suggesting a short-term overbuild risk is real.

Power Points - Clean Car Discount Cuts Sales—February 2024

<ul><li>We expect combined 1H24 EBITDAF to be slightly down on 1H23, but the prior period benefitted from record-high North Island hydro generation.</li><li>That has meant sector cost of generation has increased, particularly impacting Genesis Energy (GNE). T</li><li>he standout performer will be Contact Energy (CEN) as it reports record half year EBITDAF, however, its outlook for the remainder of 2H24 is likely to be the most subdued due to the effects of its Tauhara geothermal project not coming on line as expected. </li></ul>

We expect combined 1H24 EBITDAF to be slightly down on 1H23, but the prior period benefitted from record-high North Island hydro generation.That has meant sector cost of generation has increased, particularly impacting Genesis Energy (GNE). The standout performer will be Contact Energy (CEN) as it reports record half year EBITDAF, however, its outlook for the remainder of 2H24 is likely to be the most subdued due to the effects of its Tauhara geothermal project not coming on line as expected. 

Electricity Sector - Earnings Growth Stalls — 1H24 Sector Preview

<ul><li>Meridian Energy (MEL) has closed out 1H24 with a (slightly) soft month operationally, due mainly to below average hydro generation.</li><li>Despite the soft finish, we expect 1H24 to come in ahead of 1H23 with the key drivers higher wholesale electricity prices and retail margins. </li><li>Opex remains a concern and is running +2% above the top of MEL's FY24 guidance range. </li></ul>

Meridian Energy (MEL) has closed out 1H24 with a (slightly) soft month operationally, due mainly to below average hydro generation.Despite the soft finish, we expect 1H24 to come in ahead of 1H23 with the key drivers higher wholesale electricity prices and retail margins. Opex remains a concern and is running +2% above the top of MEL's FY24 guidance range. 

Meridian Energy - Treading Water — 1H24 Operating Statistics

New Zealand

Meridian Energy Ltd. operates as a state-owned electricity generator. The Company produces hydro-electric power and supplies electricity to residential, business, and rural customers. Meridian Energy provides services throughout New Zealand.

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Meridian Energy (MEL NZ)

Meridian Energy - Sun Shines on Electrification — 1H24 Result

Meridian Energy (MEL) delivered a record 1H24 operating result for its New Zealand operations, with strong retail margin growth underpinning the...

Forsyth Barr

Equity Strategy - WACC Review; a Lower Rfr and Adding C&ESG

For the first time in three years we are moving our WACC assumptions down. This is driven by a modestly lower (-25 bps) interpolated 10-year...

Forsyth Barr

Power Points - Clean Car Discount Cuts Sales—February 2024

January 2024 saw a good top-up of hydro lakes, easing near-term hydro generation concerns, strong electricity demand growth and EV sales collapsing...

Forsyth Barr

Electricity Sector - Earnings Growth Stalls — 1H24 Sector Preview

We expect combined 1H24 EBITDAF to be slightly down on 1H23, but the prior period benefitted from record-high North Island hydro generation.

Forsyth Barr

Meridian Energy - Treading Water — 1H24 Operating Statistics

Meridian Energy (MEL) has closed out 1H24 with a (slightly) soft month operationally, due mainly to below average hydro generation. Despite the...

Forsyth Barr

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