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>Transport Trends</h2>
Applying the Brakes
Anecdotal feedback and industry data support a broader softening of freight and passenger demand. The near term volume outlook is subdued and won’t be helped by above trend pricing growth across various modes, given cost pressures needing to be passed on. Operating deleverage (i.e. margin pressure) may be a feature over the next 12 months, if the softening volume story continues to play out. In contrast, sector valuations are close to record highs, thanks largely to low bond rates benefiting the transport infrastructure stocks. Our favoured sector plays are now Freightways (FRE) and Air New Zealand (AIR).
Key transport trends and themes
Key themes across airports and airlines, roads and rail, and ports and shipping identified in Transport Trends include:
<ul>
<li>Heavy vehicle traffic falling: NZTA data shows that two of the past three months have shown a decline against the prior year. Industry feedback suggests softening activity across different freight modes.</li>
<li>Air NZ taking back international capacity share: Having lost share during the 2016–2017 aviation boom, Air NZ is now winning some of it back. It continues to pursue robust capacity growth despite softer demand.</li>
<li>Tauranga’s cargo gains: Port of Tauranga has gained significant share of Upper North Island import/export cargo from Ports of Auckland and Northport over the last few decades; share gains have accelerated in recent years, but will likely slow&nbsp; over the next 12 months.</li>
</ul>
<div class="content-highlight">
Sector preferences
We summarise our sector stock ratings as follows:
<ul>
<li>OUTPERFORM: n/a </li>
<li>NEUTRAL: Air New Zealand, Freightways, Mainfreight, Napier Port</li>
<li>UNDERPERFORM: Auckland Airport, Port of Tauranga&nbsp;</li>
</ul>
</div>
Andy Bowley
andy.bowley@forsythbarr.co.nz
+64 4 495 8246

Transport Trends
Applying the Brakes
Anecdotal feedback and industry data support a broader softening of freight and passenger demand. The near term volume outlook is subdued and won’t be helped by above trend pricing growth across various modes, given cost pressures needing to be passed on. Operating deleverage (i.e. margin pressure) may be a feature over the next 12 months, if the softening volume story continues to play out. In contrast, sector valuations are close to record highs, thanks largely to low bond rates benefiting the transport infrastructure stocks. Our favoured sector plays are now Freightways (FRE) and Air New Zealand (AIR).
Key transport trends and themes
Key themes across airports and airlines, roads and rail, and ports and shipping identified in Transport Trends include:

Heavy vehicle traffic falling: NZTA data shows that two of the past three months have shown a decline against the prior year. Industry feedback suggests softening activity across different freight modes.
Air NZ taking back international capacity share: Having lost share during the 2016–2017 aviation boom, Air NZ is now winning some of it back. It continues to pursue robust capacity growth despite softer demand.
Tauranga’s cargo gains: Port of Tauranga has gained significant share of Upper North Island import/export cargo from Ports of Auckland and Northport over the last few decades; share gains have accelerated in recent years, but will likely slow&nbsp; over the next 12 months.


Sector preferences
We summarise our sector stock ratings as follows:

OUTPERFORM: n/a 
NEUTRAL: Air New Zealand, Freightways, Mainfreight, Napier Port
UNDERPERFORM: Auckland Airport, Port of Tauranga&nbsp;


Andy Bowley
andy.bowley@forsythbarr.co.nz
+64 4 495 8246

Air New Zealand

Transport Trends: Applying the Brakes