New Zealand Professional Investment Services Firm

Forsyth Barr

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.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Augusta Capital</h2>
<p><strong>Mark to Market — Reinstate at NEUTRAL</strong></p>
<p><strong>NEUTRAL</strong></p>
<p>Augusta Capital (AUG) has announced that it has received a takeover notice from ASX listed Centuria Capital (CNI), outlining terms for a deal that would see 100% of AUG's shares acquired at an implied price of NZ$1.00, a 46% premium to AUG's prior close price. We believe CNI's proposed offer is compelling given it implies a value for the funds management business of 5% of assets under management (AUM) or a &gt;10x EBIT multiple, both of which compare favourably with recent transactions. We reinstate coverage on AUG with a NEUTRAL rating and an NZ$0.95 12-month target price. Our target price suggests 6% upside to yesterday's close but is a 5% discount to CNI's implied offer price.</p>
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<h3>CNI&nbsp;takeover offer take two</h3>
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<p>Following CNI's terminated Bid Implementation Agreement (BIA), where it sought to acquire 100% of AUG's equity at an NZ$2.00 per share purchase price, it has returned for another try. The takeover notice released yesterday outlined the intended offer, where CNI would acquire 100% of the outstanding shares for an implied price of NZ$1.00 per share. The implied offer price of NZ$1.00 per share is made up of two components; (1) NZ$0.20 per AUG share, and (2) 0.392 CNI shares per AUG share at a CNI share price of A$1.91. While we believe the likelihood of a formal takeover offer is high, given the fluid and uncertain economic backdrop, there is still a risk that no takeover is implemented.</p>
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<h3>What's next from here?</h3>
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<p>AUG will release a target company statement which will outline its directors recommendation and an independent adviser's report on the merits of the offer within 14 days. From there, if CNI decides to make a takeover offer, it must do so between 14 and 30 days from the date it issued the takeover notice (i.e. 29 June–15 July). CNI expects implementation of the takeover by the end of August.</p>
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<h3>Reinstate as NEUTRAL</h3>
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<p>We reinstate coverage of AUG with a NEUTRAL rating. We have reviewed our earnings forecasts as well as our discounted cash flow (DCF) and net asset value (NAV) valuation methods. AUG will report FY20 results on 29 June and we expect an AFFO loss of NZ$(0.1)m. We expect AFFO to increase to NZ$3.1m in FY21 largely due to reduced costs. We forecast FY22 AFFO of NZ$5.3m driven by increased fee income. Our spot NAV suggests a value of NZ$0.91 and our spot DCF is NZ$0.94. Our NAV capitalises AUG's NZ$1.8bn AUM at 4%, in line with the median price paid for recent property management acquisitions. Rolling these valuations forward 12-months we arrive at our target price of NZ$0.95.</p>
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<div><strong>Rohan Koreman-Smit CFA</strong></div>
<div><a href="mailto:rohan.koreman-smit@forsythbarr.co.nz" target="_blank" rel="noopener">rohan.koreman-smit@<wbr>forsythbarr.co.nz</a></div>
<div>+64 9 368 0085</div>
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<div><strong>Ashton Olds</strong></div>
<div><a href="mailto:ashton.olds@forsythbarr.co.nz" target="_blank" rel="noopener">ashton.olds@forsythbarr.co.nz</a></div>
<div>+64 9 368 0127</div>
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Augusta Capital
Mark to Market — Reinstate at NEUTRAL
NEUTRAL
Augusta Capital (AUG) has announced that it has received a takeover notice from ASX listed Centuria Capital (CNI), outlining terms for a deal that would see 100% of AUG's shares acquired at an implied price of NZ$1.00, a 46% premium to AUG's prior close price. We believe CNI's proposed offer is compelling given it implies a value for the funds management business of 5% of assets under management (AUM) or a &gt;10x EBIT multiple, both of which compare favourably with recent transactions. We reinstate coverage on AUG with a NEUTRAL rating and an NZ$0.95 12-month target price. Our target price suggests 6% upside to yesterday's close but is a 5% discount to CNI's implied offer price.


CNI&nbsp;takeover offer take two


Following CNI's terminated Bid Implementation Agreement (BIA), where it sought to acquire 100% of AUG's equity at an NZ$2.00 per share purchase price, it has returned for another try. The takeover notice released yesterday outlined the intended offer, where CNI would acquire 100% of the outstanding shares for an implied price of NZ$1.00 per share. The implied offer price of NZ$1.00 per share is made up of two components; (1) NZ$0.20 per AUG share, and (2) 0.392 CNI shares per AUG share at a CNI share price of A$1.91. While we believe the likelihood of a formal takeover offer is high, given the fluid and uncertain economic backdrop, there is still a risk that no takeover is implemented.


What's next from here?


AUG will release a target company statement which will outline its directors recommendation and an independent adviser's report on the merits of the offer within 14 days. From there, if CNI decides to make a takeover offer, it must do so between 14 and 30 days from the date it issued the takeover notice (i.e. 29 June–15 July). CNI expects implementation of the takeover by the end of August.


Reinstate as NEUTRAL


We reinstate coverage of AUG with a NEUTRAL rating. We have reviewed our earnings forecasts as well as our discounted cash flow (DCF) and net asset value (NAV) valuation methods. AUG will report FY20 results on 29 June and we expect an AFFO loss of NZ$(0.1)m. We expect AFFO to increase to NZ$3.1m in FY21 largely due to reduced costs. We forecast FY22 AFFO of NZ$5.3m driven by increased fee income. Our spot NAV suggests a value of NZ$0.91 and our spot DCF is NZ$0.94. Our NAV capitalises AUG's NZ$1.8bn AUM at 4%, in line with the median price paid for recent property management acquisitions. Rolling these valuations forward 12-months we arrive at our target price of NZ$0.95.



Rohan Koreman-Smit CFA
rohan.koreman-smit@forsythbarr.co.nz
+64 9 368 0085





Ashton Olds
ashton.olds@forsythbarr.co.nz
+64 9 368 0127



Augusta Capital: Mark to Market — Reinstate at NEUTRAL