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Forsyth Barr

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Winton Land<br>Win Some, Lose Some</h2>
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<p><strong>NEUTRAL</strong></p>
<p>Winton Land Limited (WIN) has announced that its application to have the Sunfield development be reconsidered under the Urban Development Act (UDA) has been declined. WIN was confident that its Sunfield development fell within the specifications of the UDA, however this is the second time the project has been knocked back. WIN has announced that it will push forward with the development through the traditional Resource Management Act (RMA) approach. While this will see delays in delivery of some parts of the project, specifically the industrial land, it also lowers upfront capital works. With the southern part of the site scheduled for development from 2023 residential lot delivery is less affected. Whilst this announcement removes one of the near-term catalysts for the stock it continues to have favourable longer-term exposure to the NZ residential market and option value from early stage retirement opportunities. NEUTRAL.</p>
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<h3>What's changed?&nbsp;</h3>
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<li><strong>Earnings</strong>:&nbsp;FY22-23 unchanged but lower enabling works reduces FY24 net debt and lifts our NPAT forecast +1%.</li>
<li><strong>Target price</strong>: Decreased -5% to NZ$3.78 reflecting delayed realisation of Sunfield cashflows partly offset by lower enabling works.</li>
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<h3>Sunfield&nbsp;recap</h3>
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<p>Sunfield, a 200 hectare (HA) project in Takanini, Auckland, is WIN's largest project to date and accounts for more than half of future residential lot settlements by number and value. Sunfield has an estimated gross development value (GDV) of over NZ$1.7b which includes NZ$444m of commercial land and we estimate expected gross margins above 40%. Residential development has occurred along both the western and southern boundaries of the property, and 50 hectares of the Sunfield land is already designated Future Urban Zone (FUZ) scheduled to be development ready between 2023 and 2027 under Auckland Council’s Future Growth Strategy.&nbsp;</p>
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<h3>Change of plans</h3>
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<p>With the UDA application unsuccessful WIN will fall back to Plan B for Sunfield. Specifically, development of the FUZ land at the southern end of the site. WIN will concurrently apply to rezone the balance of the site under a traditional private plan change. Private plan changes typically take five years. The most significant impact on our forecasts is the timing of commercial land sales which we now assume occurs in FY29 vs. our prior expectation of FY26. We have also phased Sunfield enabling works (loop road, stormwater, etc) over a longer period. However, our residential profile is unchanged with settlements from FY27 with FUZ land delivering c.1,500 lots or c.40% of WIN's total Sunfield residential yield.</p>
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Winton Land Win Some, Lose Some

NEUTRAL
Winton Land Limited (WIN) has announced that its application to have the Sunfield development be reconsidered under the Urban Development Act (UDA) has been declined. WIN was confident that its Sunfield development fell within the specifications of the UDA, however this is the second time the project has been knocked back. WIN has announced that it will push forward with the development through the traditional Resource Management Act (RMA) approach. While this will see delays in delivery of some parts of the project, specifically the industrial land, it also lowers upfront capital works. With the southern part of the site scheduled for development from 2023 residential lot delivery is less affected. Whilst this announcement removes one of the near-term catalysts for the stock it continues to have favourable longer-term exposure to the NZ residential market and option value from early stage retirement opportunities. NEUTRAL.


What's changed?&nbsp;



Earnings:&nbsp;FY22-23 unchanged but lower enabling works reduces FY24 net debt and lifts our NPAT forecast +1%.
Target price: Decreased -5% to NZ$3.78 reflecting delayed realisation of Sunfield cashflows partly offset by lower enabling works.



Sunfield&nbsp;recap


Sunfield, a 200 hectare (HA) project in Takanini, Auckland, is WIN's largest project to date and accounts for more than half of future residential lot settlements by number and value. Sunfield has an estimated gross development value (GDV) of over NZ$1.7b which includes NZ$444m of commercial land and we estimate expected gross margins above 40%. Residential development has occurred along both the western and southern boundaries of the property, and 50 hectares of the Sunfield land is already designated Future Urban Zone (FUZ) scheduled to be development ready between 2023 and 2027 under Auckland Council’s Future Growth Strategy.&nbsp;


Change of plans


With the UDA application unsuccessful WIN will fall back to Plan B for Sunfield. Specifically, development of the FUZ land at the southern end of the site. WIN will concurrently apply to rezone the balance of the site under a traditional private plan change. Private plan changes typically take five years. The most significant impact on our forecasts is the timing of commercial land sales which we now assume occurs in FY29 vs. our prior expectation of FY26. We have also phased Sunfield enabling works (loop road, stormwater, etc) over a longer period. However, our residential profile is unchanged with settlements from FY27 with FUZ land delivering c.1,500 lots or c.40% of WIN's total Sunfield residential yield.


Winton Land Ltd

Winton Land: Win Some, Lose Some