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

Vital Healthcare Property Trust / Equity Bottom-Up

<ul><li>VHP reported a solid FY23 result underpinned by acquisitions, development completions and CPI linked rent growth.</li><li>Higher than expected tax was the key variation to our forecasts.</li><li>While FY24 DPS guidance was slightly disappointing it is a minimum, and the timing and value of asset sales could provide upside. </li></ul>

VHP reported a solid FY23 result underpinned by acquisitions, development completions and CPI linked rent growth.Higher than expected tax was the key variation to our forecasts.While FY24 DPS guidance was slightly disappointing it is a minimum, and the timing and value of asset sales could provide upside. 

Vital Healthcare - FY23 Result — Busy Developing

<ul><li>VHP has reported FY23 AFFO +8% to NZ$73.3m reflecting higher rental income from acquisitions, developments, and inflation linked rent growth being partially offset by higher interest and tax.</li><li>However, due to an expanded capital base, AFFO per unit was down -6% on the prior period.</li><li>The result was slightly below our expectations largely due to higher tax expense.</li></ul>

VHP has reported FY23 AFFO +8% to NZ$73.3m reflecting higher rental income from acquisitions, developments, and inflation linked rent growth being partially offset by higher interest and tax.However, due to an expanded capital base, AFFO per unit was down -6% on the prior period.The result was slightly below our expectations largely due to higher tax expense.

Vital Healthcare - FY23 Result First Take – FY24 Guidance Slightly Below

<ul><li>Rising cap rates drive revaluations: Draft 2H23 revaluations of VHP's portfolio resulted in a -NZ$160m movement in asset values with +34bps increase in cap rates partly offset by rent growth and FX movements.</li><li>Asset devaluations more than priced in: The listed equity market had already more than priced in this level of cap rate expansion and asset devaluation.</li><li>Higher gearing being offset through asset sales: We estimate VHP's FY23 gearing to be c.38%, which is creeping towards its management's upper limit of 42.5%.</li></ul>

Rising cap rates drive revaluations: Draft 2H23 revaluations of VHP's portfolio resulted in a -NZ$160m movement in asset values with +34bps increase in cap rates partly offset by rent growth and FX movements.Asset devaluations more than priced in: The listed equity market had already more than priced in this level of cap rate expansion and asset devaluation.Higher gearing being offset through asset sales: We estimate VHP's FY23 gearing to be c.38%, which is creeping towards its management's upper limit of 42.5%.

Vital Healthcare: Benign Revaluation Diagnosis

Thematic (Sector/Industry)

<ul><li>It has been a bleak couple of months for the listed property sector.</li><li>The one-two punch of the proposed tax changes and higher for longer interest rates has seen the sector sell off -14% over the last three months.</li><li>This was the fourth largest three month correction since 1996, behind only the Asian debt crisis, the rapid rate hiking cycle in June last year, and the start of the COVID pandemic. </li></ul>

It has been a bleak couple of months for the listed property sector.The one-two punch of the proposed tax changes and higher for longer interest rates has seen the sector sell off -14% over the last three months.This was the fourth largest three month correction since 1996, behind only the Asian debt crisis, the rapid rate hiking cycle in June last year, and the start of the COVID pandemic. 

Real Estate Reflections - The Storm Before the Storm

<ul><li>It hasn't been a great couple of months for the property sector. After being hit with political promises of higher taxes in August, rising interest rates saw the sector sell off in September.</li><li>With the NZ 10 year Government bond yield now c.5.5%, sector valuation metrics, which already looked full versus history, have come sharply back into focus.</li><li>Persistently high interest rates remain a headwind for the sector, particularly given higher taxes and interest costs are likely to see dividends cut (we forecast -3% on average by FY26). </li></ul>

It hasn't been a great couple of months for the property sector. After being hit with political promises of higher taxes in August, rising interest rates saw the sector sell off in September.With the NZ 10 year Government bond yield now c.5.5%, sector valuation metrics, which already looked full versus history, have come sharply back into focus.Persistently high interest rates remain a headwind for the sector, particularly given higher taxes and interest costs are likely to see dividends cut (we forecast -3% on average by FY26). 

Real Estate Reflections - Here We Go Again?

New Zealand

Vital Healthcare Property Trust is a property trust that invests in and manages healthcare facilities in New Zealand and Australia.

Vital Healthcare Property Trust (VHP NZ)

Vital Healthcare - FY23 Result — Busy Developing

VHP reported a solid FY23 result underpinned by acquisitions, development completions and CPI linked rent growth. Higher than expected tax was the...

Forsyth Barr

Vital Healthcare - FY23 Result First Take – FY24 Guidance Slightly Below

VHP has reported FY23 AFFO +8% to NZ$73.3m reflecting higher rental income from acquisitions, developments, and inflation linked rent growth being...

Forsyth Barr

Vital Healthcare: Benign Revaluation Diagnosis

Vital Healthcare's (VHP) 2H23 draft valuations have resulted in a -5% reduction in the value of its property assets with larger value declines in...

Forsyth Barr

Real Estate Reflections - The Storm Before the Storm

The one-two punch of the proposed tax changes and higher for longer interest rates has seen the sector sell off -14% over the last three months.

Forsyth Barr

Real Estate Reflections - Here We Go Again?

It hasn't been a great couple of months for the property sector. After being hit with political promises of higher taxes in August, rising interest...

Forsyth Barr