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>Covenants are not created equal; we do not forecast any breaches, and if it gets close, we expect leniency from the banks</li><li>Level of debt likely a key driver of performance over next 18 months — OCA and RYM best positioned</li><li>In theory an inflationary environment should be good news for aged care stocks</li></ul>

Covenants are not created equal; we do not forecast any breaches, and if it gets close, we expect leniency from the banksLevel of debt likely a key driver of performance over next 18 months — OCA and RYM best positionedIn theory an inflationary environment should be good news for aged care stocks

Aged Care Sector: Tide Is Going Out; Debt Coming to the Surface

<ul><li>Our Montgomerie-Ibbotson (MI) index decreased very slightly in November, down -0.1% versus October 2022 and up +5.1% vs November 2021</li><li>The incremental COVID pricing buffer built up during the house price rally in 2020 and 2021 is now, on average, fully depleted, as New Zealand faces its biggest nominal house price decline for at least 50 years</li><li>The glass half empty approach would be to focus on the depleted buffer, while the glass half full approach focusses on the ability for the aged care operators to hold prices stable in the midst of a sharp housing downturn</li></ul>

Our Montgomerie-Ibbotson (MI) index decreased very slightly in November, down -0.1% versus October 2022 and up +5.1% vs November 2021The incremental COVID pricing buffer built up during the house price rally in 2020 and 2021 is now, on average, fully depleted, as New Zealand faces its biggest nominal house price decline for at least 50 yearsThe glass half empty approach would be to focus on the depleted buffer, while the glass half full approach focusses on the ability for the aged care operators to hold prices stable in the midst of a sharp housing downturn

Aged Care Sector: Montgomerie-Ibbotson Aged Care Pricing Index (13-Dec-2022)

<ul><li>The RBNZ has done its best to make sure none of us approach 2023 with any illusions of good times ahead</li><li>Mortgage rates have hit a 10 year high, inflation is expected to remain stubbornly elevated, and the icing on RBNZ's economic cake is its forecast of four quarters of declining GDP</li><li>When choosing our five stocks to watch we have leaned on companies with the majority of their exposure overseas (Infratil [IFT], Vulcan Steel [VSL], KMD Brands [KMD]) or with attractive valuations (Oceania Healthcare [OCA], SkyCity [SKC]) where we think that the bad news is firmly in the price</li></ul>

The RBNZ has done its best to make sure none of us approach 2023 with any illusions of good times aheadMortgage rates have hit a 10 year high, inflation is expected to remain stubbornly elevated, and the icing on RBNZ's economic cake is its forecast of four quarters of declining GDPWhen choosing our five stocks to watch we have leaned on companies with the majority of their exposure overseas (Infratil [IFT], Vulcan Steel [VSL], KMD Brands [KMD]) or with attractive valuations (Oceania Healthcare [OCA], SkyCity [SKC]) where we think that the bad news is firmly in the price

Equity Strategy - The Year Ahead: Five Themes and Five Stocks

<ul><li>The aged care sector is valued around or significantly below equity book value</li><li>It's a RYM problem, not a sector problem; three of the four operators are close to debt free in FY26/FY27</li><li>6x EV/annuity EBITDA with no debt in FY27/28 — an attractive proposition</li></ul>

The aged care sector is valued around or significantly below equity book valueIt's a RYM problem, not a sector problem; three of the four operators are close to debt free in FY26/FY276x EV/annuity EBITDA with no debt in FY27/28 — an attractive proposition

Aged Care Sector: What If? Fast Track to Ex-Growth

Equity Bottom-Up

<ul><li>Oceania Healthcare (OCA) delivered underlying earnings below our expectations due to higher costs and lower new sale gains</li><li>Annuity EBITDA fared better, up +21% versus 1H22 and +4% ahead of our forecasts.</li><li>We remain of the view that OCA is one of the most attractive medium and long term investments under our coverage</li></ul>

Oceania Healthcare (OCA) delivered underlying earnings below our expectations due to higher costs and lower new sale gainsAnnuity EBITDA fared better, up +21% versus 1H22 and +4% ahead of our forecasts.We remain of the view that OCA is one of the most attractive medium and long term investments under our coverage

Oceania Healthcare: 1H23 Result — Time to Slow Down?

New Zealand

Oceania Healthcare is New Zealand’s largest owners and operators of retirement villages.

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Oceania Healthcare (OCA NZ)

Aged Care Sector: Tide Is Going Out; Debt Coming to the Surface

The three aged care stocks with March year ends (Ryman [RYM], Arvida [ARV] and Oceania [OCA]) have tripled net debt over the last five years; As a...

Forsyth Barr

Aged Care Sector: Montgomerie-Ibbotson Aged Care Pricing Index (13-Dec-2022)

Our Montgomerie-Ibbotson (MI) index decreased very slightly in November, down -0.1% versus October 2022 and up +5.1% vs November 2021 - this is the...

Forsyth Barr

Equity Strategy - The Year Ahead: Five Themes and Five Stocks

When choosing our five stocks to watch we have leaned on companies with the majority of their exposure overseas (Infratil [IFT], Vulcan...

Forsyth Barr

Aged Care Sector: What If? Fast Track to Ex-Growth

The aged care sector is valued around or significantly below equity book value, which suggests to us that the market is losing confidence not only...

Forsyth Barr

Oceania Healthcare: 1H23 Result — Time to Slow Down?

Oceania Healthcare (OCA) delivered underlying earnings below our expectations due to higher costs and lower new sale gains; annuity EBITDA fared...

Forsyth Barr

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