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>Building weekly</h2>
New Zealand
<ul>
<li>Housing activity robust (REINZ, Sep.): House sales down -0.6% mom, +4.5% yoy (previous -6.1% mom, -3.6% yoy). Days to sell in Auckland flat yoy at 39 (vs long-term average 35), ex-Auckland -1 to 34 (vs. long-term average 42). House prices firm: +1.4% mom, +3.5% yoy (previous +1.3% mom, +2.9% yoy), with Auckland +1.6% mom, -0.8% yoy and ex-Auckland +1.3% mom, +7.3% yoy.</li>
<li>Net migration remains supportive (12 months to Aug.): +53.8k (previous +55.0k). Post measurement changes the exact short-term trends are unclear, however, there is no doubt the level remains elevated and supportive of demand.</li>
<li>Rental inflation highlights housing supply is tight (Sep.): 3m rolling average rents – Auckland +1.9%, Wellington +5.8%, rest of North Island +7.0%, Canterbury +2.4% and rest of South Island +7.8%.</li>
<li>Construction cost pressures moderating (CPI 3Q): Cost of new housing +0.6% qoq, +2.8% yoy (previous +0.7% qoq, +3.5% yoy; excluding cost of land) vs. overall inflation rate of +1.5% yoy</li>
<li>Fletcher Construction’s struggling to put projects to bed: FBU reaffirmed “that it remains within the Construction provisions announced in February 2018”. <a href="https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&amp;objectid=12277734" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.nzherald.co.nz/business/news/article.cfm?c_id%3D3%26objectid%3D12277734&amp;source=gmail&amp;ust=1571699203534000&amp;usg=AFQjCNE6IUf30GO3CwYnwcF9iQFLMeM1Hw" rel="noopener">SkyCity to finish $1b of projects later next year: speedy Adelaide could beat slow NZICC</a>,</li>
<li><a href="https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&amp;objectid=12276643" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.nzherald.co.nz/business/news/article.cfm?c_id%3D3%26objectid%3D12276643&amp;source=gmail&amp;ust=1571699203534000&amp;usg=AFQjCNHQHLMAXHmXvOHR9nh5BL1sDd0jiA" rel="noopener">Fletcher in $31m dispute with ministry over Greymouth hospital</a>,&nbsp;<a href="https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&amp;objectid=12274326" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.nzherald.co.nz/business/news/article.cfm?c_id%3D3%26objectid%3D12274326&amp;source=gmail&amp;ust=1571699203534000&amp;usg=AFQjCNG-GI-qzlJ12U2XvK9Y8Q48WAzEnA" rel="noopener">Fletcher sued for $7.5m over Christchurch justice precinct</a></li>
<li>More construction sector distress: Eden Limited, which was working on Ryman’ Healthcare’s Logan Campbell retirement village, has been placed into receivership. <a href="https://www.stuff.co.nz/business/116552255/construction-company-eden-limited-in-receivership" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.stuff.co.nz/business/116552255/construction-company-eden-limited-in-receivership&amp;source=gmail&amp;ust=1571699203534000&amp;usg=AFQjCNFj3k_nES0zLclk_GRsTWNSvvniBg" rel="noopener">Construction company Eden Limited in receivership</a></li>
<li>Scary. NZ’s history of defective building practices continues: New imaging technology has revealed hundreds of major buildings have defective or missing concrete or reinforcing steel. <a href="https://www.stuff.co.nz/business/industries/116557551/new-zealands-defective-concrete-crisis-revealed-by-investigators" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.stuff.co.nz/business/industries/116557551/new-zealands-defective-concrete-crisis-revealed-by-investigators&amp;source=gmail&amp;ust=1571699203534000&amp;usg=AFQjCNEXB8TiEset-c9tq8RN3BFrNKtkXQ" rel="noopener">Widespread defective or missing concrete or reinforcing steel revealed</a></li>
<li>Speculation LafargeHolcim looking to exit Australia and NZ: At A$2-3b it is too large for the likes of Fletcher Building. <a href="https://www.theaustralian.com.au/business/dataroom/lafargeholcim-mulls-exiting-ausgralia-and-nz-to-cut-debt/news-story/b7bb22ff0d54e7637362857d5c4bda8b" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.theaustralian.com.au/business/dataroom/lafargeholcim-mulls-exiting-ausgralia-and-nz-to-cut-debt/news-story/b7bb22ff0d54e7637362857d5c4bda8b&amp;source=gmail&amp;ust=1571699203534000&amp;usg=AFQjCNEM4cQEjsEZ-mgv8B1JfpHqjQbH7g" rel="noopener">LafargeHolcim mulls exiting Australia and NZ to cut debt</a></li>
</ul>
Australia
<ul>
<li>RBA expects construction to decline further and trough in 2020, with a supply shortfall emerging in the “foreseeable future”: <a href="https://www.rba.gov.au/speeches/2019/sp-dg-2019-10-17.html" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.rba.gov.au/speeches/2019/sp-dg-2019-10-17.html&amp;source=gmail&amp;ust=1571699203534000&amp;usg=AFQjCNGi50FtfU6OH8EpezzC8ZlzlclRpw" rel="noopener">RBA Speech: Housing and the Economy</a></li>
<li>Private equity interest in Boral? US firm Lone Star Funds has a history investing in building materials. <a href="https://www.theaustralian.com.au/business/dataroom/boral-purchase-by-lone-star-funds-could-be-on-cards-in-6bn-deal/news-story/b33abc9a400437085f17f97cf8ec27e4" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://www.theaustralian.com.au/business/dataroom/boral-purchase-by-lone-star-funds-could-be-on-cards-in-6bn-deal/news-story/b33abc9a400437085f17f97cf8ec27e4&amp;source=gmail&amp;ust=1571699203534000&amp;usg=AFQjCNEcCPMS9TKZeKDj6z8e834kaV8aDw" rel="noopener">Boral purchase by Lone Star Funds could be on the cards in $6bn deal</a></li>
<li>Residential approvals lead indicator remains soft (Construction finance approvals, Jul.): +0.3% mom, -7.9% yoy (previous -1.1% mom, -14.4% yoy). Trend series -9.4% yoy.</li>
<li>Construction activity falling:</li>
</ul>
&nbsp; &nbsp; &nbsp; &nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Performance of Construction Index (Aug.): 42.6 (previous 44.6; contraction &lt;50&lt;&nbsp; &nbsp;expansion) with apartments 33.0 (previous 35.8), houses 46.2 (previous 42.8), commercial 46.7 (previous 46.4) and engineering 39.3 (previous 45.4).
&nbsp; &nbsp; &nbsp; &nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Construction work done (2Q19): Residential -4.5% qoq, -8.7% yoy (previous -1.2% qoq, -1.5% yoy); non-residential -7.2% qoq, -2.7% yoy (previous +4.9% qoq, +5.9% yoy); engineering -0.9% qoq, -15.4% yoy (previous -5.6% qoq, -14.2% yoy).
Matt Henry CFA Director / Senior Analyst, Equities Forsyth Barr Limited &nbsp;
T:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;+64 (9) 368 0115 TF:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;0800 367 227 F:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;+64 (9) 368 0092 P:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;PO Box 97, Auckland 1140 W: &nbsp;&nbsp; &nbsp;&nbsp; &nbsp;&nbsp; &nbsp;<a href="https://foundry.smartkarma.com/www.forsythbarr.co.nz" target="_blank" rel="noopener">www.forsythbarr.co.nz</a> Twitter: @forsythbarr

Building weekly
New Zealand

Housing activity robust (REINZ, Sep.): House sales down -0.6% mom, +4.5% yoy (previous -6.1% mom, -3.6% yoy). Days to sell in Auckland flat yoy at 39 (vs long-term average 35), ex-Auckland -1 to 34 (vs. long-term average 42). House prices firm: +1.4% mom, +3.5% yoy (previous +1.3% mom, +2.9% yoy), with Auckland +1.6% mom, -0.8% yoy and ex-Auckland +1.3% mom, +7.3% yoy.
Net migration remains supportive (12 months to Aug.): +53.8k (previous +55.0k). Post measurement changes the exact short-term trends are unclear, however, there is no doubt the level remains elevated and supportive of demand.
Rental inflation highlights housing supply is tight (Sep.): 3m rolling average rents – Auckland +1.9%, Wellington +5.8%, rest of North Island +7.0%, Canterbury +2.4% and rest of South Island +7.8%.
Construction cost pressures moderating (CPI 3Q): Cost of new housing +0.6% qoq, +2.8% yoy (previous +0.7% qoq, +3.5% yoy; excluding cost of land) vs. overall inflation rate of +1.5% yoy
Fletcher Construction’s struggling to put projects to bed: FBU reaffirmed “that it remains within the Construction provisions announced in February 2018”. SkyCity to finish $1b of projects later next year: speedy Adelaide could beat slow NZICC,
Fletcher in $31m dispute with ministry over Greymouth hospital,&nbsp;Fletcher sued for $7.5m over Christchurch justice precinct
More construction sector distress: Eden Limited, which was working on Ryman’ Healthcare’s Logan Campbell retirement village, has been placed into receivership. Construction company Eden Limited in receivership
Scary. NZ’s history of defective building practices continues: New imaging technology has revealed hundreds of major buildings have defective or missing concrete or reinforcing steel. Widespread defective or missing concrete or reinforcing steel revealed
Speculation LafargeHolcim looking to exit Australia and NZ: At A$2-3b it is too large for the likes of Fletcher Building. LafargeHolcim mulls exiting Australia and NZ to cut debt

Australia

RBA expects construction to decline further and trough in 2020, with a supply shortfall emerging in the “foreseeable future”: RBA Speech: Housing and the Economy
Private equity interest in Boral? US firm Lone Star Funds has a history investing in building materials. Boral purchase by Lone Star Funds could be on the cards in $6bn deal
Residential approvals lead indicator remains soft (Construction finance approvals, Jul.): +0.3% mom, -7.9% yoy (previous -1.1% mom, -14.4% yoy). Trend series -9.4% yoy.
Construction activity falling:

&nbsp; &nbsp; &nbsp; &nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Performance of Construction Index (Aug.): 42.6 (previous 44.6; contraction &lt;50&lt;&nbsp; &nbsp;expansion) with apartments 33.0 (previous 35.8), houses 46.2 (previous 42.8), commercial 46.7 (previous 46.4) and engineering 39.3 (previous 45.4).
&nbsp; &nbsp; &nbsp; &nbsp;-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Construction work done (2Q19): Residential -4.5% qoq, -8.7% yoy (previous -1.2% qoq, -1.5% yoy); non-residential -7.2% qoq, -2.7% yoy (previous +4.9% qoq, +5.9% yoy); engineering -0.9% qoq, -15.4% yoy (previous -5.6% qoq, -14.2% yoy).
Matt Henry CFA Director / Senior Analyst, Equities Forsyth Barr Limited &nbsp;
T:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;+64 (9) 368 0115 TF:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;0800 367 227 F:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;+64 (9) 368 0092 P:&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;PO Box 97, Auckland 1140 W: &nbsp;&nbsp; &nbsp;&nbsp; &nbsp;&nbsp; &nbsp;www.forsythbarr.co.nz Twitter: @forsythbarr

Fletcher Building

Building Weekly