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

New Zealand King Salmon / Equity Bottom-Up

<h2>New Zealand King Salmon (NZK)</h2>
FY19 Result Initial Impressions — In-line, FY20 guidance reaffirmed
New Zealand King Salmon (NZK) reported Operating EBITDA in line with expectations, on sales volume down -3% on the prior period. NZK faced a second challenging summer in FY20 with warmer water temperatures contributing towards elevated fish mortalities. As a result NZK has already announced it is shifting to a site single year class operating model (all salmon rearing at a single site will be from the same year’s broodstock with fallowing occurring between harvest and restocking).
NZK will pay a final dividend of 3.0cps giving a full year dividend of 5.0cps.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Result highlights:
<ul>
<li>Continued price growth: NZK achieved strong underlying price growth across all markets highlighting the strength of its branded product. Combined with continued optimisation of sales mix towards higher value products/markets, the average price lifted +11%.</li>
<li>Elevated capex: NZK has reaffirmed FY20 capex guidance of NZ$20m, as it shifts to site single year class operating model and focusses on improvements in fish health.</li>
<li>Open ocean farming:&nbsp;NZK has applied for its first open ocean farming consent in the Cook Strait. The proposed open ocean farm is less exposed than previously thought meaning farming technology currently available could be used. Assuming a smooth consenting process (we view this as unlikely) the earliest possible harvest from the site would by early FY23.</li>
</ul>
Outlook and our view&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
NZK has reaffirmed its FY20 Operating EBITDA guidance range of NZ$25.0m to NZ$28.5m. We see little to change our near-term earnings expectations at this point. NZK has also provided a first time FY22 harvest volume forecast of 9,200MT, this compares to our more conservative expectations of 8,700MT.
NZK is facing a period of subdued volume growth following the FY19 mortality event combined with a transition to site single year class operating. However, the medium term growth outlook remains attractive, in our opinion, as volume growth is provided under current consents. Although not in forecasts, possible open ocean farming opportunities could provide significant upside. OUTPERFORM.
Conference call — 10:00am NZ time&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
NZK will host a conference call at 10:00am NZ time. Dial in:&nbsp;0800 122 360&nbsp;(Australia 1800 760 146). Conference ID:&nbsp;10001344.
Profit and loss summary (NZ$m)
<table class="table table-striped">
<tbody>
<tr>
<td></td>
<td>FY18A</td>
<td>FY19A</td>
<td>% chg</td>
<td>Forbar&nbsp;</td>
<td>% diff</td>
</tr>
<tr>
<td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; New Zealand Retail</td>
<td>41.4</td>
<td>40.6</td>
<td>-1.9%</td>
<td>42.4</td>
<td>-4.1%</td>
</tr>
<tr>
<td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; New Zealand Foodservice</td>
<td>37.8</td>
<td>39.2</td>
<td>3.5%</td>
<td>38.4</td>
<td>1.8%</td>
</tr>
<tr>
<td>Domestic</td>
<td>79.2</td>
<td>79.8</td>
<td>0.7%</td>
<td>80.8</td>
<td>-1.3%</td>
</tr>
<tr>
<td>Export</td>
<td>81.0</td>
<td>92.9</td>
<td>14.6%</td>
<td>87.7</td>
<td>5.8%</td>
</tr>
<tr>
<td>Revenue</td>
<td>160.3</td>
<td>172.6</td>
<td>7.7%</td>
<td>168.5</td>
<td>-2.4%</td>
</tr>
<tr>
<td>Operating COGS</td>
<td>(112.8)</td>
<td>(125.7)</td>
<td>11.5%</td>
<td>(126.8)</td>
<td>-0.9%</td>
</tr>
<tr>
<td>Operating gross profit</td>
<td>47.5</td>
<td>46.9</td>
<td>-1.2%</td>
<td>41.7</td>
<td>12.6%</td>
</tr>
<tr>
<td>Other expenses</td>
<td>(21.3)</td>
<td>(21.8)</td>
<td>2.0%</td>
<td>(16.5)</td>
<td>32.3%</td>
</tr>
<tr>
<td>Pro-forma EBITDA</td>
<td>26.2</td>
<td>25.2</td>
<td>-3.8%</td>
<td>25.2</td>
<td>-0.2%</td>
</tr>
<tr>
<td>Depreciation &amp; ammortisation</td>
<td>(5.1)</td>
<td>(6.2)</td>
<td>22.1%</td>
<td>(6.3)</td>
<td>-0.6%</td>
</tr>
<tr>
<td>Pro-forma EBIT&nbsp;</td>
<td>21.1</td>
<td>18.9</td>
<td>-10.1%</td>
<td>19.0</td>
<td>-0.1%</td>
</tr>
<tr>
<td>Interest &amp; tax expense</td>
<td>(4.9)</td>
<td>(7.6)</td>
<td>53.6%</td>
<td>(5.3)</td>
<td>43.1%</td>
</tr>
<tr>
<td>Reported NPAT</td>
<td>16.1</td>
<td>11.4</td>
<td>-29.6%</td>
<td>13.7</td>
<td>-16.9%</td>
</tr>
<tr>
<td>Adjustments</td>
<td>(1.7)</td>
<td>1.5</td>
<td>-191%</td>
<td>0.0</td>
<td>n/a</td>
</tr>
<tr>
<td>Pro-forma Opearting NPAT</td>
<td>14.5</td>
<td>12.9</td>
<td>-11.0%</td>
<td>13.7</td>
<td>-5.8%</td>
</tr>
<tr>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr>
<td>EPS</td>
<td>10.4</td>
<td>9.3</td>
<td>-11.0%</td>
<td>9.9</td>
<td>-5.8%</td>
</tr>
<tr>
<td>Final DPS (cps)</td>
<td>3.0</td>
<td>3.0</td>
<td>0.0%</td>
<td>3.0</td>
<td>0.0%</td>
</tr>
</tbody>
</table>
Source: Company reports, Forsyth Barr analysis
Guy Hooper
Analyst, Equities&nbsp;
<table class="table table-striped">
<tbody>
<tr>
<td>
T:
</td>
<td>
+64 4 495 5255
</td>
</tr>
<tr>
<td>
TF:
</td>
<td>
0800 367 227
</td>
</tr>
<tr>
<td>
F:
</td>
<td>
+64 4 495 8193
</td>
</tr>
<tr>
<td>
P:
</td>
<td>
PO Box: 5266, Wellington 6145
</td>
</tr>
<tr>
<td></td>
<td></td>
</tr>
<tr>
<td>
W:
</td>
<td>
<a href="http://www.forsythbarr.co.nz/" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://www.forsythbarr.co.nz&amp;source=gmail&amp;ust=1567121016400000&amp;usg=AFQjCNFjsl9sZvxt5le18u9WhuJ5e-zWiQ" rel="noopener">www.forsythbarr.co.nz</a>
</td>
</tr>
<tr>
<td>Twitter:</td>
<td>
<a href="http://twitter.com/forsythbarr" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://twitter.com/forsythbarr&amp;source=gmail&amp;ust=1567121016400000&amp;usg=AFQjCNH00nUxNkW3O5diC4SekmcukNG30w" rel="noopener">@forsythbarr</a>
</td>
</tr>
</tbody>
</table>

New Zealand King Salmon (NZK)
FY19 Result Initial Impressions — In-line, FY20 guidance reaffirmed
New Zealand King Salmon (NZK) reported Operating EBITDA in line with expectations, on sales volume down -3% on the prior period. NZK faced a second challenging summer in FY20 with warmer water temperatures contributing towards elevated fish mortalities. As a result NZK has already announced it is shifting to a site single year class operating model (all salmon rearing at a single site will be from the same year’s broodstock with fallowing occurring between harvest and restocking).
NZK will pay a final dividend of 3.0cps giving a full year dividend of 5.0cps.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Result highlights:

Continued price growth: NZK achieved strong underlying price growth across all markets highlighting the strength of its branded product. Combined with continued optimisation of sales mix towards higher value products/markets, the average price lifted +11%.
Elevated capex: NZK has reaffirmed FY20 capex guidance of NZ$20m, as it shifts to site single year class operating model and focusses on improvements in fish health.
Open ocean farming:&nbsp;NZK has applied for its first open ocean farming consent in the Cook Strait. The proposed open ocean farm is less exposed than previously thought meaning farming technology currently available could be used. Assuming a smooth consenting process (we view this as unlikely) the earliest possible harvest from the site would by early FY23.

Outlook and our view&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
NZK has reaffirmed its FY20 Operating EBITDA guidance range of NZ$25.0m to NZ$28.5m. We see little to change our near-term earnings expectations at this point. NZK has also provided a first time FY22 harvest volume forecast of 9,200MT, this compares to our more conservative expectations of 8,700MT.
NZK is facing a period of subdued volume growth following the FY19 mortality event combined with a transition to site single year class operating. However, the medium term growth outlook remains attractive, in our opinion, as volume growth is provided under current consents. Although not in forecasts, possible open ocean farming opportunities could provide significant upside. OUTPERFORM.
Conference call — 10:00am NZ time&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
NZK will host a conference call at 10:00am NZ time. Dial in:&nbsp;0800 122 360&nbsp;(Australia 1800 760 146). Conference ID:&nbsp;10001344.
Profit and loss summary (NZ$m)




FY18A
FY19A
% chg
Forbar&nbsp;
% diff


&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; New Zealand Retail
41.4
40.6
-1.9%
42.4
-4.1%


&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; New Zealand Foodservice
37.8
39.2
3.5%
38.4
1.8%


Domestic
79.2
79.8
0.7%
80.8
-1.3%


Export
81.0
92.9
14.6%
87.7
5.8%


Revenue
160.3
172.6
7.7%
168.5
-2.4%


Operating COGS
(112.8)
(125.7)
11.5%
(126.8)
-0.9%


Operating gross profit
47.5
46.9
-1.2%
41.7
12.6%


Other expenses
(21.3)
(21.8)
2.0%
(16.5)
32.3%


Pro-forma EBITDA
26.2
25.2
-3.8%
25.2
-0.2%


Depreciation &amp; ammortisation
(5.1)
(6.2)
22.1%
(6.3)
-0.6%


Pro-forma EBIT&nbsp;
21.1
18.9
-10.1%
19.0
-0.1%


Interest &amp; tax expense
(4.9)
(7.6)
53.6%
(5.3)
43.1%


Reported NPAT
16.1
11.4
-29.6%
13.7
-16.9%


Adjustments
(1.7)
1.5
-191%
0.0
n/a


Pro-forma Opearting NPAT
14.5
12.9
-11.0%
13.7
-5.8%










EPS
10.4
9.3
-11.0%
9.9
-5.8%


Final DPS (cps)
3.0
3.0
0.0%
3.0
0.0%



Source: Company reports, Forsyth Barr analysis
Guy Hooper
Analyst, Equities&nbsp;




T:


+64 4 495 5255




TF:


0800 367 227




F:


+64 4 495 8193




P:


PO Box: 5266, Wellington 6145








W:


www.forsythbarr.co.nz



Twitter:

@forsythbarr





New Zealand King Salmon (NZK): FY19 Result Initial Impressions — In-Line, FY20 Guidance Reaffirmed

New Zealand

New Zealand King Salmon Investments Limited provides fish farming services. The Company produces, grows, and sells salmons products. New Zealand King Salmon Investments serves customers worldwide.

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New Zealand King Salmon (NZK NZ)

New Zealand King Salmon (NZK): FY19 Result Initial Impressions — In-Line, FY20 Guidance Reaffirmed

New Zealand King Salmon (NZK) FY19 Result Initial Impressions — In-line, FY20 guidance reaffirmed New Zealand King Salmon (NZK) reported Operating...

Forsyth Barr

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