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>Synlait Milk’s (SML) largest shareholder, Bright Dairy (39% ownership), has decided to provide a short-term NZ$130m loan, enabling Synlait to repay its senior lender by 15 July 2024.</li><li>While this isn't a dial mover (and still requires shareholder approval), it does provide firm confirmation of Bright's previous verbal support.</li><li>The devil will be in the details of the terms. Will the loan be ranked ahead of the bonds, and what does the repayment schedule look like? </li></ul>

Synlait Milk’s (SML) largest shareholder, Bright Dairy (39% ownership), has decided to provide a short-term NZ$130m loan, enabling Synlait to repay its senior lender by 15 July 2024.While this isn't a dial mover (and still requires shareholder approval), it does provide firm confirmation of Bright's previous verbal support.The devil will be in the details of the terms. Will the loan be ranked ahead of the bonds, and what does the repayment schedule look like? 

Synlait Milk - Bright Provides Life Support

<ul><li>Synlait Milk's (SML) 1H24 result had few redeeming features.</li><li>Profitability is under significant pressure, transparency on key drivers remains low and the balance sheet remains an area of significant concern.</li><li>Notwithstanding North Island (NI) asset sales, the outlook is very challenged (~NZ$310m of debt payments due over the next eight months). </li></ul>

Synlait Milk's (SML) 1H24 result had few redeeming features.Profitability is under significant pressure, transparency on key drivers remains low and the balance sheet remains an area of significant concern.Notwithstanding North Island (NI) asset sales, the outlook is very challenged (~NZ$310m of debt payments due over the next eight months). 

Synlait Milk - 1H24 Result — Push Comes to Shove

<ul><li>Synlait Milk's (SML) 1H24 market update reinforced the challenging environment it faces.</li><li>Principally: (1) debt levels (and interest costs) remain elevated, and (2) asset base under utilisation continues to be a material drag on margins.</li><li>No new information was provided on SML's potential balance sheet repair (update due 25 March 2024) which will remain a significant overhang on the share price.</li></ul>

Synlait Milk's (SML) 1H24 market update reinforced the challenging environment it faces.Principally: (1) debt levels (and interest costs) remain elevated, and (2) asset base under utilisation continues to be a material drag on margins.No new information was provided on SML's potential balance sheet repair (update due 25 March 2024) which will remain a significant overhang on the share price.

<ul><li>Synlait Milk's (SML) wide ranging market update had a disappointing tone.</li><li>While details were provided on the ongoing supply exclusivity arbitration process with The a2 Milk Company (ATM) and potential pricing renegotiations, the key takeaway is SML’s balance sheet challenges persist.</li><li>A sale of Dairyworks ‘cannot at this time be assured’ and debt levels ‘remain elevated’, not helped by subdued profitability, with 1H24 NPAT expected to be down on 1H23. </li></ul>

Synlait Milk's (SML) wide ranging market update had a disappointing tone.While details were provided on the ongoing supply exclusivity arbitration process with The a2 Milk Company (ATM) and potential pricing renegotiations, the key takeaway is SML’s balance sheet challenges persist.A sale of Dairyworks ‘cannot at this time be assured’ and debt levels ‘remain elevated’, not helped by subdued profitability, with 1H24 NPAT expected to be down on 1H23. 

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

Index Rebalance

<ul>
<li>There were a lot of rebalance implementations in China on Friday, plus a few upcoming index changes that were announced during the week.</li>
<li>There are a lot of implementations this week, with <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">KOSPI 200</a> and <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150</a> on Thursday and then others across a bunch of countries on Friday.</li>
<li>There were big inflows to <a href="https://www.smartkarma.com/entities/tracker-fund-of-hong-kong-ltd" target="_blank" data-smartkarma-citation="entities:29257:1" rel="noopener">Tracker Fund of Hong Kong (2800 HK)</a> during the week taking units outstanding to a new high. ETF inflows continue even as the market drops.</li>
</ul>


There were a lot of rebalance implementations in China on Friday, plus a few upcoming index changes that were announced during the week.
There are a lot of implementations this week, with KOSPI 200 and KOSDAQ 150 on Thursday and then others across a bunch of countries on Friday.
There were big inflows to Tracker Fund of Hong Kong (2800 HK) during the week taking units outstanding to a new high. ETF inflows continue even as the market drops.


Index Rebalance & ETF Flow Recap: NKY, TW Div+, ASX200, NZX50, Mom30, Top10EW, MVW, Rakuten Bank

New Zealand

Synlait Milk Ltd is a milk production company.  The Company produces, processes, markets and distributes milk, milk powder products and ingredients.

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Synlait Milk (SML NZ)

Synlait Milk - Bright Provides Life Support

Synlait Milk’s (SML) largest shareholder, Bright Dairy (39% ownership), has decided to provide a short-term NZ$130m loan, enabling Synlait to repay...

Forsyth Barr

Synlait Milk - 1H24 Result — Push Comes to Shove

Profitability is under significant pressure, transparency on key drivers remains low and the balance sheet remains an area of significant concern.

Forsyth Barr

Synlait Milk - Double Downgrade

No new information was provided on SML's potential balance sheet repair (update due 25 March 2024) which will remain a significant overhang on the...

Forsyth Barr

Synlait Milk - Christmas Grinch (Again)

Synlait Milk's (SML) wide ranging market update had a disappointing tone. While details were provided on the ongoing supply exclusivity...

Forsyth Barr

Index Rebalance & ETF Flow Recap: NKY, TW Div+, ASX200, NZX50, Mom30, Top10EW, MVW, Rakuten Bank

This recap highlights Insights covering Asian index rebalances (announcements/ forecasts/ IPO Fast Entry/ M&A driven changes). We also highlight...

Brian Freitas

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