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>
Nothing to Worry About
Augusta Capital (AUG) has advised that FY20 earnings are expected to be in line with FY19; however, earnings in 1H20 to 30 September will be below 1H19 due to lower transactional fee income and development expenditure associated with two hotel projects targeted for AUG’s soon to be launched Augusta Tourism Fund. It is the nature of AUG’s business that its earnings can be volatile period to period. We expect this volatility to decrease over time as its business has an increased focus on ongoing management fee income rather than higher front loaded transaction fees. We have not changed our forecasts with AUG well placed to grow funds under management over the near to medium term, and remain with a NEUTRAL investment rating.
Upside to our numbers — we will review following interim result on 27 November
We have had an expectation that earnings can be volatile given the nature of AUG’s business. AUG’s guidance of flat earnings for FY19 indicates there is some upside to our forecasts. The timing of transaction income is hard to predict and we will review it once we get more information at the 1H20 result and detailed outlook comments regarding the timing of near-term funds management activities.
The interim quarter dividend payment of 1.625 cents per share is expected to be maintained when the interim results are announced, which is in line with our forecasts.
Recent funds management activity
AUG has noted that it has been busy developing its hotel properties in Auckland and Queenstown, ahead of including those properties in its soon to be launched Augusta Tourism Fund. AUG is targeting this fund to be launched before financial year-end, 31 March 2020. AUG also hopes to have its diversified Fund established by then.
The Augusta Industrial Fund has unconditionally purchased 27–29 Neales Road, East Tamaki, Auckland for $25.2m with settlement on 11 November 2019 and a 1% acquisition fee for AUG. AUG also continues to look for acquisitions for Asset Plus (APL). APL is expected to report its 1H20 result on 29 November.
AUG is planning its first residential land development project and is conducting due diligence on a 40ha block just outside of Warkworth. There is potential for up to 800 homes to be developed on the land, accompanied with other amenities including a neighbourhood centre.&nbsp;
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Investment View
AUG remains well positioned to grow across a range of funds management vehicles and has transitioned to a fully funds management business. It remains with an attractive dividend yield, but earnings are potentially more volatile in the near-term as it moves to focus on base management fees versus transaction fees. AUG is an increasingly valuable, well performing and unique funds management vehicle. Our rating is NEUTRAL.&nbsp;
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<a target="_blank"></a><a target="_blank">Jeremy Simpson, CFA</a>
<a target="_blank">jeremy.simpson@forsythbarr.co.nz</a>
<a target="_blank">+64 9 368 0022</a>

Augusta Capital
Nothing to Worry About
Augusta Capital (AUG) has advised that FY20 earnings are expected to be in line with FY19; however, earnings in 1H20 to 30 September will be below 1H19 due to lower transactional fee income and development expenditure associated with two hotel projects targeted for AUG’s soon to be launched Augusta Tourism Fund. It is the nature of AUG’s business that its earnings can be volatile period to period. We expect this volatility to decrease over time as its business has an increased focus on ongoing management fee income rather than higher front loaded transaction fees. We have not changed our forecasts with AUG well placed to grow funds under management over the near to medium term, and remain with a NEUTRAL investment rating.
Upside to our numbers — we will review following interim result on 27 November
We have had an expectation that earnings can be volatile given the nature of AUG’s business. AUG’s guidance of flat earnings for FY19 indicates there is some upside to our forecasts. The timing of transaction income is hard to predict and we will review it once we get more information at the 1H20 result and detailed outlook comments regarding the timing of near-term funds management activities.
The interim quarter dividend payment of 1.625 cents per share is expected to be maintained when the interim results are announced, which is in line with our forecasts.
Recent funds management activity
AUG has noted that it has been busy developing its hotel properties in Auckland and Queenstown, ahead of including those properties in its soon to be launched Augusta Tourism Fund. AUG is targeting this fund to be launched before financial year-end, 31 March 2020. AUG also hopes to have its diversified Fund established by then.
The Augusta Industrial Fund has unconditionally purchased 27–29 Neales Road, East Tamaki, Auckland for $25.2m with settlement on 11 November 2019 and a 1% acquisition fee for AUG. AUG also continues to look for acquisitions for Asset Plus (APL). APL is expected to report its 1H20 result on 29 November.
AUG is planning its first residential land development project and is conducting due diligence on a 40ha block just outside of Warkworth. There is potential for up to 800 homes to be developed on the land, accompanied with other amenities including a neighbourhood centre.&nbsp;

Investment View
AUG remains well positioned to grow across a range of funds management vehicles and has transitioned to a fully funds management business. It remains with an attractive dividend yield, but earnings are potentially more volatile in the near-term as it moves to focus on base management fees versus transaction fees. AUG is an increasingly valuable, well performing and unique funds management vehicle. Our rating is NEUTRAL.&nbsp;

Jeremy Simpson, CFA
jeremy.simpson@forsythbarr.co.nz
+64 9 368 0022

Augusta Capital

Augusta Capital: Nothing to Worry About