Morningstar Equities Research

Morningstar Equities Research - RYM-NZ, IFT, IFT-NZ and EHL, MFT-NZ, MIN, NWH, RRL on price change

Ryman Healthcare Limited RYM-NZ| Stupendous Growth by Ryman in 2014 on Lofty New Sales Margins but 2015 Is Unlikely to Be as Rosy
Morningstar Recommendation: Reduce

Nachiket Moghe, CFA, Morningstar Analyst - 64 9 915 6776
Ryman Healthcare reported outstanding results for fiscal 2014, with underlying net profit after tax, or NPAT, exceeding our estimates by 3.5%. This was driven by slightly higher EBITDA and lower-than-estimated depreciation and interest costs. NPAT was 18% higher versus the prior period and represents uninterrupted double-digit earnings growth for the firm since listing in 1999. We have not made any material changes to our fiscal 2015 and 2016 forecasts. We believe earnings growth will taper off in the next few years as a result of lower margins on new construction and flat care earnings.

Our fair value estimate rises to NZD 7.00 per share from NZD 6.50 as a result of changes to our longer term forecasts, as we incorporate additional village rollouts in New Zealand and Australia. However, we still believe strong earnings growth is more than adequately factored into the stock price and valuations appear rich at the moment, with the stock trading at a 20% premium to fair value. While our valuation has unfortunately trailed the share price, we find it very hard to justify the market's implied outlook. We make no changes to our narrow economic moat rating which reflects the firm's low-cost position and brand strength.

Infratil Limited IFT-NZ, IFT | No Surprises in Infratil’s 2014 Results, 2015 Will be Buoyed by Trustpower's Snowtown Wind Farm
Morningstar Recommendation: Hold
Nachiket Moghe, CFA, Morningstar Analyst - 64 9 915 6776
Infratil's full-year result was at the top end of its recently downgraded guidance range for earnings before interest, tax, depreciation and amortisation, or EBITDA, of NZD 490 to AUD 500 million. It was, however, 5.2% down on the previous year, reflecting softer trading conditions at TrustPower and NZ Bus, translation impact of a weaker Australian dollar and lower ownership in Z Energy. We maintain our 2015 EBITDA forecast of NZD 545 million, implying year-on-year growth of 9% mainly reflecting an uptick in earnings at TrustPower from the contribution of Snowtown.

We maintain our fair value estimate of NZD 2.50 per share. We view the shares as fairly valued, trading close to our fair value estimate. We maintain our no-moat rating on the company as we don't consider TrustPower or Infratil Energy Australia, IEA, (comprising 56% of Infratil's value) to have economic moats. TrustPower and Infratil Energy Australia are key value drivers for Infratil. However, in the medium term, we believe Infratil can reap rich rewards through prudent investment in key infrastructure assets that have good long-term growth prospects.

Emeco Holdings - Upgrade due to price change

Mineral Resources - Downgrade due to price change

Mainfreight - Downgrade due to price change

NRW Holdings - Upgrade due to price change

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