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.

Thematic (Sector/Industry)

<ul><li>Recent share price declines have increased the sector’s attractiveness, particularly Meridian Energy (MEL), which we upgrade to OUTPERFORM.</li><li>The sector is resilient to economic downturns and trade wars, offering both growth and a strong dividend yield. 2025 has started with unprecedented low hydro inflows, particularly in the South Island, where storage has fallen -37% since late 2024.</li><li>South Island inflows are the lowest since records started being kept and North Island inflows are not far behind. </li></ul>

Recent share price declines have increased the sector’s attractiveness, particularly Meridian Energy (MEL), which we upgrade to OUTPERFORM.The sector is resilient to economic downturns and trade wars, offering both growth and a strong dividend yield. 2025 has started with unprecedented low hydro inflows, particularly in the South Island, where storage has fallen -37% since late 2024.South Island inflows are the lowest since records started being kept and North Island inflows are not far behind. 

Power Points - Getting Very Thirsty—March 2025

<ul><li>The Commerce Commission's (ComCom) Statement of Issues (SoI) has raised several concerns about Contact Energy's (CEN) proposed acquisition of Manawa Energy (MNW), prompting us to lower the probability of clearance to 50%.</li><li>Consequently, we reduce our MNW target price by -27cps (-4.2%) to NZ$6.15 and downgrade our rating to NEUTRAL (from OUTPERFORM).</li><li>In January 2025, inflows and hydro storage levels continued to decline, triggering thermal generation, surging wholesale electricity prices, and pushing ASX futures higher.</li></ul>

The Commerce Commission's (ComCom) Statement of Issues (SoI) has raised several concerns about Contact Energy's (CEN) proposed acquisition of Manawa Energy (MNW), prompting us to lower the probability of clearance to 50%.Consequently, we reduce our MNW target price by -27cps (-4.2%) to NZ$6.15 and downgrade our rating to NEUTRAL (from OUTPERFORM).In January 2025, inflows and hydro storage levels continued to decline, triggering thermal generation, surging wholesale electricity prices, and pushing ASX futures higher.

Power Points - ComCom Raises Clearance Concerns—Feb 2025

<ul><li>It was a particularly challenging 1H25 for the sector, with the dry start to the period resulting in expensive back-up options being procured and a drop in earnings for the sector.</li><li>Meridian Energy (MEL) took the brunt of the pain, and we anticipate a record-low six-month result (since listing in 2013) for MEL.</li><li>Very low wholesale electricity prices in 2Q25 benefited Mercury (MCY) and Genesis Energy (GNE) in particular, while we expect Contact Energy (CEN) to report a record half-year result due to the first full six months of Tauhara generation. </li></ul>

It was a particularly challenging 1H25 for the sector, with the dry start to the period resulting in expensive back-up options being procured and a drop in earnings for the sector.Meridian Energy (MEL) took the brunt of the pain, and we anticipate a record-low six-month result (since listing in 2013) for MEL.Very low wholesale electricity prices in 2Q25 benefited Mercury (MCY) and Genesis Energy (GNE) in particular, while we expect Contact Energy (CEN) to report a record half-year result due to the first full six months of Tauhara generation. 

Electricity Sector - A Tale of Two Quarters—1H25 Preview

<ul>
<li>2024 ended with index considerations influencing short-term share prices, such that we have downgraded Contact Energy (CEN) to NEUTRAL and reiterate the buying opportunity in Mercury (MCY).</li>
<li>The likely inclusion of CEN at the expense of MCY in the MSCI Standard Index has seen CEN’s share price pop and MCY's drop.</li>
<li>2024 was dominated by two events that will shape the sector in the years ahead. </li>
</ul>


2024 ended with index considerations influencing short-term share prices, such that we have downgraded Contact Energy (CEN) to NEUTRAL and reiterate the buying opportunity in Mercury (MCY).
The likely inclusion of CEN at the expense of MCY in the MSCI Standard Index has seen CEN’s share price pop and MCY's drop.
2024 was dominated by two events that will shape the sector in the years ahead. 


Power Points Index Opportunities — January 2025

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

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/contact-energy-ltd" target="_blank" data-smartkarma-citation="entities:13136:1" rel="noopener">Contact Energy (CEN NZ)</a> has outperformed <a href="https://www.smartkarma.com/entities/mighty-river-power" target="_blank" data-smartkarma-citation="entities:9933:1" rel="noopener">Mercury NZ Ltd (MCY NZ)</a> over the last month off the back of expected passive flows in February.</li>
<li>Despite the outperformance, <a href="https://www.smartkarma.com/entities/contact-energy-ltd" target="_blank" data-smartkarma-citation="entities:13136:1" rel="noopener">Contact Energy (CEN NZ)</a> trades at a lower forward PE compared to <a href="https://www.smartkarma.com/entities/mighty-river-power" target="_blank" data-smartkarma-citation="entities:9933:1" rel="noopener">Mercury NZ Ltd (MCY NZ)</a>, though it does trade at a higher Price to Book. </li>
<li>There could be large passive inflows to <a href="https://www.smartkarma.com/entities/contact-energy-ltd" target="_blank" data-smartkarma-citation="entities:13136:1" rel="noopener">Contact Energy (CEN NZ)</a> and large passive outflows from <a href="https://www.smartkarma.com/entities/mighty-river-power" target="_blank" data-smartkarma-citation="entities:9933:1" rel="noopener">Mercury NZ Ltd (MCY NZ)</a> in February.</li>
</ul>



Contact Energy (CEN NZ) has outperformed Mercury NZ Ltd (MCY NZ) over the last month off the back of expected passive flows in February.
Despite the outperformance, Contact Energy (CEN NZ) trades at a lower forward PE compared to Mercury NZ Ltd (MCY NZ), though it does trade at a higher Price to Book. 
There could be large passive inflows to Contact Energy (CEN NZ) and large passive outflows from Mercury NZ Ltd (MCY NZ) in February.


NZ: Contact Energy (CEN NZ) Hotter Than Mercury (MCY NZ) As Catalyst Looms

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)

Power Points - Getting Very Thirsty—March 2025

Recent share price declines have increased the sector’s attractiveness, particularly Meridian Energy (MEL), which we upgrade to OUTPERFORM.

Forsyth Barr

Power Points - ComCom Raises Clearance Concerns—Feb 2025

The Commerce Commission's (ComCom) Statement of Issues (SoI) has raised several concerns about Contact Energy's (CEN) proposed acquisition...

Forsyth Barr

Electricity Sector - A Tale of Two Quarters—1H25 Preview

It was a particularly challenging 1H25 for the sector, with the dry start to the period resulting in expensive back-up options being procured and a...

Forsyth Barr

Power Points Index Opportunities — January 2025

2024 ended with index considerations influencing short-term share prices, such that we have downgraded Contact Energy (CEN) to NEUTRAL and...

Forsyth Barr

NZ: Contact Energy (CEN NZ) Hotter Than Mercury (MCY NZ) As Catalyst Looms

Contact Energy has outperformed Mercury NZ over the last couple of months. A major catalyst is the potential migration of the stocks between size...

Brian Freitas

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