nz mid-cap spotlightimg.scoop.co.nz/media/pdfs/1704/wwp_investor_day__conference_… · integration...

NZ MID-CAP SPOTLIGHT

12 April 2017

NZ Mid-Cap Spotlight Investor Day | 12 April 2017

CONTENTS

Welcome and introduction …………………………………………………………….. 1

Programme ……………………………………………………………………………… 2

Company profiles ……………………………………………………………………... 3

Summerset Group …………………………………………………………………… 4

Turners ……………………………………………………………………….............. 5

AFT Pharmaceuticals ……………………………………………………………….. 6

Pushpay Holdings ……………………………………………………………………. 7

Syft Technologies ……………………………………………………………………. 8

Scott Technology …………………………………………………………………….. 9

NZ Mid-Cap Spotlight Investor Day | 12 April 2017 1

WELCOME

Woodward Partners and NZX together welcome you to the NZ Mid-Cap Spotlight investor day.

Today we are pleased to present to investors a selection of NZX-listed medium-sized companies.

Companies presenting range in size from $200m to more than $1 billion. We are also pleased to be able

to welcome unlisted company Syft Technologies.

Companies on show represent three industries that are currently extremely topical in the New Zealand

financial markets: technology, retirement and media.

Woodward Partners and NZX are each committed to supporting and growing New Zealand’s equity

capital markets.

About Woodward Partners

Woodward Partners is an independent research house, institutional sharebroker and corporate advisor.

Our strength is our senior team which comprises analysts, dealers and executives with many years of

markets experience.

Woodward Partners is committed to providing New Zealand-listed and unlisted companies and investors

with the highest-quality investment research across different market sectors, including the small cap and

mid cap segments of the New Zealand market.

Woodward Partners Securities is an accredited NZX Advising Firm.

Contacts:

Neville Todd Simon Wilson

DDI: +64 4 974 7381 DDI: +64 4 974 7382

Mob: +64 21 673 030 Mob: +64 21 562 015

[email protected] [email protected]

www.woodwardpartners.co.nz

About NZX

NZX operates the New Zealand capital markets, agricultural commodities and New Zealand energy

markets. It provides the trading mechanisms and infrastructure, develops products and provides the data

and information that drives trading activity.

mailto:[email protected]

mailto:[email protected]

http://www.woodwardpartners.co.nz/


CONFERENCE PROGRAMME

12.45pm Registration

12.55 – 1.00 NZX / Woodward Partners introduction

1.00 – 1.30 Summerset Group

1.30 – 2.00 Turners

2.00 – 2.30 AFT Pharmaceuticals

2.30 – 2.45 Woodward Partners NZ Equity Quant Screens

2.45 – 3.00 Afternoon tea

3.00 – 3.30 Pushpay Holdings

3.30 – 4.00 Syft Technologies

4.00 – 4.30 Scott Technology

4.30pm Conference close and drinks


COMPANY PROFILES


Summerset Group NZX/ASX:SUM

Growth player, growth sector

Two decades of double-digit growth

From a single retirement village (RV) in Whanganui in the mid-1990s

Summerset has since grown to become one of the ‘big-three’ listed RV

operators in the market behind only Ryman and Metlifecare. The strength

of its growth trajectory reflects both highly favourable top-down

fundamentals (a booming elderly demographic and housing market) and

strong bottom-up focus on execution (on average delivering a new village

in each of the 20 years it has been operating). Its main KPIs have grown

at a 5-year CAGR of >15% and there is no sign of Summerset taking its

foot off the pedal anytime soon. During FY2016 Summerset

commissioned a new village in Ellerslie, opened new serviced apartment

buildings in each of Nelson, Warkworth, Karaka, New Plymouth and

Katikati and opened new care facilities in Karaka, Katikati, New Plymouth

and Wigram.

Forward pipeline a key point of difference

A key point of difference between Summerset and its peers is

Summerset’s land bank. At the end of FY2016 Summerset held a land

bank inventory of 2,609 undeveloped units – almost as many as the 2,828

units it already has in service. At its FY2016 build rate of 409 units its land

bank inventory equates to more than six years’ supply. Summerset is

currently progressing large format (>200 units apiece) apartment

complexes in Ellerslie, St Johns and Parnell and in its FY2017 is targeting

delivery of 450 new units. Residents have started moving into villas in

Ellerslie with the village centre and apartment wing expected to be

completed mid-year. Notable is that current developments involve a much

stronger bias towards apartment complexes instead of Summerset’s

traditional core focus on retirement villas, increasing execution risk.

Outlook

Consensus forecasts point to a continuation of strong revenue and

margin growth as new developments are completed and begin

contributing earnings and cash flow. This does hinge on strong execution,

however Summerset’s track record to date has been encouraging.

Financial performance history & outlook estimates

RETIREMENT SECTOR

Forecasts: Bloomberg consensus

Source: Woodward Partners, Bloomberg, company data

Analyst

Guy Hallwright

+64 21 999 442 [email protected]

Business description

NZX Profile as at 7 April 2017

NZX ticker SUM.NZPrice $/share 5.36 Market cap $m 1,191.7 Issued share capital m 222.3 12-month average daily trading 000/day 308

Share price performance

3 Mths 6 Mths 12 Mths 2 Yrs

SUM +17.2% +6.1% +29.2% +61.1%

NZX50 +4.6% +1.3% +8.2% +7.2%

SUM vs NZX50 +12.7% +4.8% +21.0% +53.8%

Largest shareholders

Cooper Investors Pty 6.2%NZ Superannuation Fund 6.1%Harbour Asset Management 6.1%Fisher Funds Management 5.0%

Upcoming catalysts Timing 1. Ellerslie / Heritage Park completion Mid-20172. 1H FY2017 reporting Aug-20173. St Johns & Parnell resource consents Late 2017

Summerset is the third-largest retirement village

operator in NZ. Across its 21 villages it has 1,000 staff

caring for more than 4,200 residents. It also has an

extensive land portfolio and firm plans to develop a

further six villages over the next few years.

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SUM SUM vs NZX50

31 Dec years FY15A FY16A FY17F FY18F FY19F

Revenue $m 68.2 85.8 107.3 128.5 147.8

EBITDA $m 94.4 158.2 82.1 95.8 108.0

NPAT adj $m 37.8 56.6 66.3 76.1 85.1

EPS adj cps 17.5 26.0 27.4 32.4 39.0

P/E adj x 30.6 20.6 19.6 16.5 13.7

EV/EBITDA x 15.4 9.2 17.7 15.2 13.5

DPS cps 5.3 7.7 9.1 10.5 12.6


Turners NZX:TNR

Pedal to the metal

Growth a priority

Growth remains a priority for Turners, through M&A and by leveraging

opportunities within each business. The company sees numerous growth

opportunities in the fragmented automotive market, but maintains a

disciplined approach to identifying and assessing those that best fit the

business and will add value to shareholders. The company anticipates

another year of strong year of growth in FY18, and is likely to undertake a

foreign-exempt compliance listing on the ASX, providing it with access to

a larger capital market to support its growth strategy.

Recent initiatives performing well

In a recent update the company said the Automotive Retail division

continues to perform strongly and the Finance segment continues to

transition towards lower risk, lower margin lending. The multi-channel

approach is delivering benefits for margins and finance sales, with

positive progress being made on key initiatives including:

integration of recent acquisitions Autosure (which will contribute to

profit from FY18) and Buy Right Cars ($4m EBIT contribution

expected in the first full year);

establishment of a securitisation funding model, with BNZ credit

approval for an initial $150m, which will reduce Turners’ cost of

funds, create further finance growth headroom and strengthen

Turners’ funding base for its finance business; and

growth in demand for the MTF non-recourse finance product where

adoption by MTF originators has exceeded expectations with over

$14m in loans written since the pilot started in early December 2016,

which will contribute positively to FY18 earnings.

Outlook positive

FY2017 (March year) pretax profit is expected to be between $24.0m and

$24.5m, up 12-13% on last year. Consensus forecasts are towards the

lower end of this range, but much stronger growth is forecast in FY18.

Quarterly dividends announced for the year to date total 10 cps, with a

final dividend likely to be announced with the result in late May.


SERVICES SECTOR

31 Mar years FY15A FY16A FY17F FY18F FY19FRevenue $m 90.2 171.7 234.0 302.0 325.0EBITDA $m 20.2 35.1 30.8 40.2 44.7NPAT adj $m 18.1 15.6 17.2 22.9 26.4EPS adj cps 33.0 25.0 25.0 31.0 34.5P/E adj x 10.7 14.2 14.2 11.4 10.3EV/EBITDA x 12.7 7.3 8.4 6.4 5.8DPS cps 10.0 13.0 14.0 16.5 18.5



Analyst

Guy Hallwright




NZX ticker TNR.NZPrice $/share 3.58 Market cap $m 266.8 Issued share capital m 74.5 12-month average daily trading 000/day 29.2



TNR +1.7% +18.0% +24.3% +24.0%

NZX50 +4.6% +1.3% +8.2% +7.4%

TNR vs NZX50 -2.9% +16.7% +16.0% +16.6%


Hugh Green Investments Ltd 19.0%The Business Bakery & interests 17.1%Bartel Holdings 9.1%

Harrigens Trustees Ltd 6.8%

Turners is an integrated automotive financial services

company centred on auto retailing, motor vehicle

finance and insurance. The group was formed in 2014

when Dorchester Pacific acquired Turners Auctions,

and has since acquired Oxford Finance, Greenwich

Life Insurance, Southern Finance, Buy Right Cars and

Autosure.

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AFT Pharmaceuticals NZX:AFT; ASX:AFP

Low profile, high achiever

A diversified, geographically expanding company

AFT Pharmaceuticals (AFT) develops, markets and distributes a broad

portfolio of pharmaceutical products across all major pharmaceutical

distribution channels: over-the-counter (OTC), prescription and hospital.

AFT’s product portfolio comprises both proprietary and in-licensed

products and includes patented, branded and generic drugs. AFT’s

overall risk is reduced by steering away from developing new chemical

entities and focussing instead on improving existing treatments.

Maxigesic to drive growth

Maxigesic is a patented combination of Paracetamol and Ibuprofen

developed by AFT. It has been launched in 6 countries with distribution

agreements in 111 countries, with additional out-licensing agreements

expected to be negotiated during 2017. In Australia, Maxigesic can now

be advertised directly to consumers and is more readily available in

pharmacies following the recent decision by the Australian regulatory

authority (TGA) to reschedule codeine OTC analgesics to become

prescription medicines from 1 February 2018. With key OTC competitors

now re-scheduled, Maxigesic has an opportunity to increase its market

share (currently <1%) in Australia. Global Maxigesic tablet sales for the

FY2017 financial year are expected to increase to 74m tablets,

representing a +339% increase on FY2016.

Outlook

AFT has recently completed a $9.1m capital raise via an issue of

redeemable shares to provide additional balance sheet capacity to

continue its R&D activities and to initiate first pilot manufacturing of its

novel drug delivery technology. AFT expects total FY2017 revenue to be

in the range $69m-$71m (+4.9%-7.9%), up from $65.8m in FY2016.

Consensus forecasts are for revenues to grow to $70.1m (+6.5% y/y) in

FY2017, $96.1m (+37% y/y) in FY2018 and $124m (+29% y/y) in FY2019

and for earnings to be profitable from FY2019 on the back of the strong

forecast revenue growth and higher gross margins. By mid-2018, AFT is

targeting to have its products will be sold in over 100 countries.


HEALTHCARE SECTOR



31 Mar years FY15A FY16A FY17F FY18F FY19FRevenue $m 56.2 64.0 70.1 96.1 124.0EBITDA $m -5.7 -8.4 -12.9 -0.4 14.4NPAT adj $m n.a. -13.3 -16.4 -3.7 9.7EPS adj cps n.a. -48.0 -17.0 -3.8 24.2P/E adj x n.a. -4.8 -13.5 -60.5 9.5EV/EBITDA x -38.0 -26.0 -16.9 -500.7 15.1DPS cps n.a. n.a. n.a. n.a. n.a.

Analyst

Guy Hallwright




NZX ticker AFT.NZPrice $/share 2.30 Market cap $m 222.7 Issued share capital m 96.8 12-month average daily trading 000/day 3.9



AFT -17.3% -25.8% -18.4% n.a.

NZX50 +4.6% +1.3% +8.2% +7.2%

AFT vs NZX50 -21.8% -27.1% -26.7% n.a.


Atkinson Family Trust 75.4%Capital Royalty Partners 13.4%

AFT Pharmaceuticals is a New Zealand-based

specialty pharmaceutical company who develop,

license and sell pharmaceutical products in Australasia

and around the world. AFT has been expanding its

geographic footprint and is targeting that by mid 2018,

its products will be sold in over 100 countries.

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Pushpay NZX/ASX:PPH

Keeping the faith

Strong growth but plenty more potential

At December 2016 Pushpay had 6,143 customers, almost all of which are

US churches (97% of the customer base) which use Pushpay to engage

with their organisation and collect donations. The company added 2,800

customers in FY16 and is on track to add over 3,000 this (March) year,

slightly less than doubling its customer base. Its penetration of US

churches is only around 2%, so although growth thus far has been very

rapid, there is enormous further potential. Pushpay’s revenues are a

combination of subscription fees and volume fees. Subscription fees are

based on the size of the customer organisation and volume fees are

based on transaction volumes, and include interchange fees which are

collected by the company on behalf of third parties such as Visa or

MasterCard. Average revenue per customer was up 32% YoY in the

latest quarter to US$573 per month. The company is still losing money as

it invests in growth, but it expects to reach monthly cashflow breakeven

this calendar year which should generate profits from FY19.

Rapid ACMR growth

The key revenue run rate measure is Annualised Committed Monthly

Revenue (ACMR). ACMR in the December 2016 quarter was over

US$42m pa, up from around US$14m in the December 2015 quarter and

$3m two years ago. ACMR was up US$8.4m over the September quarter

(including US$1.1m derived from the acquisition of Bluebridge’s church

app related business in November 2016). Pushpay implemented a

number of price increases over the quarter which brought legacy plans in

line with current pricing and had a positive impact on ACMR.

Outlook: cashflow breakeven during 2017

While there are no forecasts available through Bloomberg, Pushpay said

it continues to remain on track to reach its target of US$72 million in

ACMR and breakeven on a monthly cash flow basis prior to the end of

calendar year 2017. The company expects to reach its target through

further development of its product, direct sales, its referrals strategy, and

through targeting customers that have existing relationships with

Pushpay’s strategic channel partners and other distribution partners.


TECHNOLOGY SECTOR

Source: Woodward Partners, Bloomberg, company data Source: Woodward Partners, Bloomberg, company data

Analyst

Guy Hallwright


31 Mar years FY15A FY16A FY17F FY18F FY19F

Revenue $m 1.7 14.8 n.a. n.a. n.a.

EBITDA $m -7.5 -18.4 n.a. n.a. n.a.

NPAT adj $m -7.5 -20.2 n.a. n.a. n.a.

EPS adj cps -16.2 -9.0 n.a. n.a. n.a.

P/E adj x -11.0 -19.8 n.a. n.a. n.a.

EV/EBITDA x -58.2 -23.6 n.a. n.a. n.a.

DPS cps 0.0 0.0 n.a. n.a. n.a.



NZX ticker PPH.NZPrice $/share 1.78 Market cap $m 446.0 Issued share capital m 250.6 12-month average daily trading 000/day 79



PPH -1.7% -21.8% -27.0% +75.3%

NZX50 +4.6% +1.3% +8.2% +7.4%

PPH vs NZX50 -6.3% -23.1% -35.2% +68.0%


Christopher & Peter Huljich 27.3%Christopher Heaslip 11.9%Eliot Crowther 11.1%

Pushpay provides engagement solutions that enable

meaningful connections and mobile commerce tools

that facilitate fast, secure non-point-of-sale payments.

Pushpay's target markets are the faith sector, non-

profit organisations, and enterprises (both SMEs and

larger corporates). It is growing strongly in US

churches which form most of its customer base.

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Syft Technologies

Gearing up for growth

Blue-chip client list

Syft instruments are sold throughout the world and are used in multiple

applications including safety and food contamination, testing for trace

elements in industrial clean rooms, indoor and outdoor emissions

analysis, testing for automobile manufacturers and hydrocarbon analysis

for oil & gas companies. The company has a blue-chip client base, which

includes Samsung, SC Johnson, AgroFresh, SMIC, LG Electronics,

Colgate-Palmolive, Lear Group, DOW Chemical, Australian Border Force,

Canada Border Services Agency, Baker Hughes, Astra Zeneca and the

Cleveland Clinic. CEO Doug Hastie has overseen a significant

improvement in operating and financial performance since joining in 2012.

The product and revenue model

Revenue has increased from $3.4m in FY2013 to $6m in FY16 with a

record net profit of $1.4m in FY2016. Syft believes its addressable market

is US$4 bln which could rise to US$14 bln if additional improvements are

made to its product range. Gross margins increased from 40% in FY13 to

60% in FY16, which the company expects to increase even further by

reducing the cost of build, selling more instruments direct to customers

and adding higher margin accessories to its product range. The company

prices its instruments in USD, Euro and GBP but 70% of revenue is

transacted in USD. R&D for the FY2016 year was ~$1.5m (25% of sales).

The company has the capacity to assemble around 80 instruments per

annum in NZ but has plans to outsource production to a contract

manufacturer in the UK within the next 12-18 months.

Outlook

Syft expects to see revenues and profitability rise rapidly and expects to

sell between 500 – 1,000 instruments (~$125m - $250m revenue) pa

within the next 5 years. Syft is now looking to raise additional capital to

accelerate its rate of growth. The company’s shares currently trade on the

grey market (www.sharemart.co.nz) but a move to a more visible and

liquid market is under consideration. The last share trade was at $1.45 on

17 March, valuing the company’s equity at that time at $93.6m.

Financial performance history

Unlisted

INDUSTRIALS SECTOR




Doug Hastie 14.8%ACC 14.0%Douglas Ziffel & Smoot (New York) Ltd 11.2%Whale Watch Kaikoura Ltd 10.1%

Syft Technologies is the world leading provider of

SIFT-MS solutions, revolutionising the world of

analytical trace analysis. The company was

established in 2002 based on technology first

developed by the University of Canterbury. The

company currently has 517 shareholders, the largest

two of which (CEO Doug Hastie and ACC) control

29%.

Analyst

Guy Hallwright


31 Dec years FY13A FY14A FY15A FY16A CAGR

Revenue NZ$m 3.4 5.0 5.3 6.0 20.8%

Gross Margin NZ$m 0.4 0.4 0.5 0.6 14.5%

Expenses NZ$m 2.4 3.0 2.5 2.9 n.a.

Revenue/Expenses x 1.4 1.7 2.1 2.1 n.a.

Profit NZ$m -1.7 -0.3 0.5 1.4 n.a.


Scott Technology NZX:SCT

Transformers

Growth through acquisition and new technologies

Scott continues to expand operations through acquisitions as well as

strong organic growth underpinned by an ongoing commitment to R&D to

bring new products to existing markets and develop new technologies for

new applications. Revenues from all of the company’s target industries

are growing strongly, with last year’s largest increase coming from the

meat processing sector (+256%). Scott recently reported a $4.2m pretax

profit for the six months to February 2017, up 50% on the prior 1H, on

revenues up 32% (reversing last year’s margin decline which resulted

from increased lower-margin contract work).

Operational update for 1H17

In 1H17 Australasian sales were up 34%, mainly through a series of

repeat builds for the food and industrial automation industries, but the

Australasian segment also benefited from the purchase of the BladeStop

bandsaw safety technology in October 2016. In the Americas, RobotWorx

is experiencing reduced availability of robots for refurbishment, but the

company sees potential for BladeStop bandsaw sales in the US. Scott’s

European manufacturing was expanded in 2H16 through the $0.88m

acquisition of the assets of a German equipment supplier to the appliance

industry, but development of this market will be a longer-term project.

Outlook positive

The changing global manufacturing environment is driving increasing

demand for Scott’s skills, technology and equipment. Acquisitions to

further drive strategic growth are being evaluated, but will only be

undertaken where there are strong value propositions. The company’s

meat processing technology is now seeing good uptake in both Australia

and New Zealand, with strong demand to adapt the technology to other

species, including beef and pork, which is under way. Near term growth is

expected to come mainly from the Mining and Meat Processing sectors

where new products are already being commercialised. In the medium

term the company’s commitment to R&D in areas such as automated

guided vehicles and mobile robotics is expected to drive growth in the

wider Industrial Automation sector.


INDUSTRIALS SECTOR

Forecasts: Woodward Partners


Analyst

Guy Hallwright




NZX ticker SCT.NZPrice $/share 2.94 Market cap $m 219.6 Issued share capital m 74.7 12-month average daily trading 000/day 14



SCT +30.7% +39.3% +79.3% +134%

NZX50 +4.6% +1.3% +8.2% +7.4%

SCT vs NZX50 +26.2% +38.0% +71.1% +127%


JBS Australia 50.1%Oakwood Securities 7.4%

Scott Technology is an NZ-based engineering

company specialising in the design and manufacture

of advanced automated production and process

machinery, particularly for the meat processing and

mining industries globally, with these two industries

recently contributing more than 50% of annual sales.

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31 Aug years FY15A FY16A FY17F FY18F FY19F

Revenue $m 72.3 112.0 135.0 n.a. n.a.

EBITDA $m 10.9 13.1 15.5 n.a. n.a.

NPAT adj $m 6.1 8.1 10.2 n.a. n.a.

EPS adj cps 13.8 13.3 13.6 n.a. n.a.P/E adj x 21.3 22.1 21.6 n.a. n.a.EV/EBITDA x 17.0 14.2 12.0 n.a. n.a.DPS cps 8.0 9.5 9.5 n.a. n.a.

Disclosures and Disclaimers

The report has been prepared and issued by Woodward Partners Securities Limited (Woodward Partners).

The information, analysis and views in this report are for class advice purposes only and do not constitute personalised advice (whether of an investment, legal, tax,

accounting or other nature) to any person, and may not be suitable for all investors. Before making an investment decision on the basis of the information, analysis and

views expressed in this report investors should consider whether the information, views and analysis are appropriate in light of their particular investment needs,

objectives and financial circumstances.

This report has been prepared in good faith based on public information obtained from sources believed to be accurate, reliable and complete as at the date of the

publication. However, its accuracy and completeness is not guaranteed. Woodward Partners does not, and cannot, make any representations or warranty (expressed or

implied) that the information is accurate, complete or current, and Woodward Partners excludes and disclaims (to the full extent permitted by law) any liability or

responsibility for any loss which may be incurred by any person as a result of that information, including any loss of profit or any other damage, direct or consequential.

Woodward Partners is under no obligation to update or keep current any of the information in this publication.

Woodward Partners, its employees and persons associated with Woodward Partners may have held or hold securities mentioned in this publication (or related

securities). Woodward Partners may perform services or solicit business from any of the companies listed in this report.

This publication is intended for distribution only to clients of Woodward Partners in New Zealand and other jurisdictions to whom, under relevant law, this publication

lawfully may be distributed. The report is not to be distributed to any persons in any jurisdiction where doing so would constitute a breach of laws or regulations.

Woodward Partners is an accredited NZX Firm.

Copyright © Woodward Partners Securities Limited 2017. All rights reserved.

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