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>Electricity demand growth has continued to surge, helping to keep wholesale electricity prices elevated despite the welcome top-up of hydro storage lakes that now sit close to average.</li><li>It was also a good month for NZAS, with the spike in aluminium prices a timely boost as Rio Tinto closes in on making a decision over the future of the smelter.</li><li>Following our report Demanding Some Attention — Sector Upgraded published 29 April 2024, which lifted sector target prices on average +18%, we upgraded the rating of three stocks. </li></ul>

Electricity demand growth has continued to surge, helping to keep wholesale electricity prices elevated despite the welcome top-up of hydro storage lakes that now sit close to average.It was also a good month for NZAS, with the spike in aluminium prices a timely boost as Rio Tinto closes in on making a decision over the future of the smelter.Following our report Demanding Some Attention — Sector Upgraded published 29 April 2024, which lifted sector target prices on average +18%, we upgraded the rating of three stocks. 

Power Points - Demand Powers On — May 2024

<ul><li>We are more positive on the long-term outlook for the electricity sector and upgrade Contact Energy (CEN) to OUTPERFORM and Meridian Energy (MEL) and Manawa Energy (MNW) to NEUTRAL.</li><li>Driving the more positive outlook of the sector is a view that wholesale electricity prices are likely to be higher than previously thought.</li><li>Factors behind the assumption change include stronger near-term electricity demand growth requiring more high cost baseload thermal generation for longer and the need to build generation projects higher up the demand stack. </li></ul>

We are more positive on the long-term outlook for the electricity sector and upgrade Contact Energy (CEN) to OUTPERFORM and Meridian Energy (MEL) and Manawa Energy (MNW) to NEUTRAL.Driving the more positive outlook of the sector is a view that wholesale electricity prices are likely to be higher than previously thought.Factors behind the assumption change include stronger near-term electricity demand growth requiring more high cost baseload thermal generation for longer and the need to build generation projects higher up the demand stack. 

Electricity Sector  - Demanding Some Attention — Sector Upgraded

Equity Bottom-Up

<ul><li>Strong hydrology, wind, and wholesale electricity prices have combined to produce a strong March 2024 and 3Q24 operating performance for Meridian Energy (MEL), with that momentum expected to flow through to 4Q24.</li><li>We have lifted our FY24 EBITDAF and dividend forecast +NZ$53m (+6%) and +0.4cps (+2%) respectively, driving our +4% (+20cps) increase in target price to NZ$5.25.</li><li>The changes are largely short-term operational benefits, so the longer-term outlook is little changed. </li></ul>

Strong hydrology, wind, and wholesale electricity prices have combined to produce a strong March 2024 and 3Q24 operating performance for Meridian Energy (MEL), with that momentum expected to flow through to 4Q24.We have lifted our FY24 EBITDAF and dividend forecast +NZ$53m (+6%) and +0.4cps (+2%) respectively, driving our +4% (+20cps) increase in target price to NZ$5.25.The changes are largely short-term operational benefits, so the longer-term outlook is little changed. 

Meridian Energy - It's W3 — Wind, Water and Wholesale Prices

<div><div><div><div><ul><li>March 2024 was a good month for Manawa Energy (MNW), electricity demand, and solar developers. It wasn’t such a good month for EV dealers.</li><li>MNW was the strongest performing electricity stock in March 2024 following its guidance upgrade.</li><li>Strong electricity demand growth continues and now appears to be a trend which is positive for medium-term pricing, although continued big falls in solar panel prices will help offset some of those pricing effects. </li></ul></div></div></div></div>

March 2024 was a good month for Manawa Energy (MNW), electricity demand, and solar developers. It wasn’t such a good month for EV dealers.MNW was the strongest performing electricity stock in March 2024 following its guidance upgrade.Strong electricity demand growth continues and now appears to be a trend which is positive for medium-term pricing, although continued big falls in solar panel prices will help offset some of those pricing effects. 

Power Points - Demand Is Trending Upwards — April 2024

<div><div><div><div><ul><li>Quarterly reports released in February 2024 from the wind turbine manufacturers suggest prices are starting to ease, which would be welcome news for wind developers.</li><li>1H24 results reported by the big four generator/retailers contained few surprises but did highlight ongoing opex and consenting challenges, with opex generally negatively surprising and delays to several projects.</li><li>Generator/retailer share prices generally remain elevated, in particular Mercury (MCY) which is trading just short of record highs. </li></ul></div></div></div></div>

Quarterly reports released in February 2024 from the wind turbine manufacturers suggest prices are starting to ease, which would be welcome news for wind developers.1H24 results reported by the big four generator/retailers contained few surprises but did highlight ongoing opex and consenting challenges, with opex generally negatively surprising and delays to several projects.Generator/retailer share prices generally remain elevated, in particular Mercury (MCY) which is trading just short of record highs. 

Power Points -  Wind Regaining Its Puff? — March 2024

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 - Demand Powers On — May 2024

Electricity demand growth has continued to surge, helping to keep wholesale electricity prices elevated despite the welcome top-up of hydro storage...

Forsyth Barr

Electricity Sector - Demanding Some Attention — Sector Upgraded

We are more positive on the long-term outlook for the electricity sector and upgrade Contact Energy (CEN) to OUTPERFORM and Meridian Energy (MEL)...

Forsyth Barr

Meridian Energy - It's W3 — Wind, Water and Wholesale Prices

Strong hydrology, wind, and wholesale electricity prices have combined to produce a strong March 2024 and 3Q24 operating performance for Meridian...

Forsyth Barr

Power Points - Wind Regaining Its Puff? — March 2024

Quarterly reports released in February 2024 from the wind turbine manufacturers suggest prices are starting to ease, which would be welcome news...

Forsyth Barr

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