Company Interview / Data and infrastructure stocks to soften the oil blow

Key Points:

Geopolitical tensions drive inflation expectations and prompt potential interest rate hikes in New Zealand Rising global oil prices impact New Zealand’s fuel import-dependent economy with immediate effects on agriculture Infratil (ASX:IFT) receives increased portfolio allocation due to strong data centre performance Channel Infrastructure viewed as a defensively positioned beneficiary of higher oil prices

Brad Gordon from Forsyth Barr provides insight on the impact of global events in the Middle East on New Zealand’s economy. Gordon states that ongoing geopolitical tensions are tightening global oil supply, fuelling inflation expectations and prompting the Reserve Bank to potentially bring forward interest rate increases to mid-year. With no domestic refining capacity, New Zealand relies entirely on imported fuel, resulting in vulnerability to global price shocks and increased domestic uncertainty.

Within the agricultural sector, Gordon highlights rising fuel costs as a critical challenge. Given the importance of energy for both farm operations and transporting agricultural products, higher diesel prices are shrinking farming margins. Despite this, he points out that robust soft commodity prices are currently providing some financial relief to farmers.

Turning to equities, Gordon points to Infratil (ASX:IFT) as a standout, with Forsyth Barr recently increasing its model portfolio allocation to the company's maximum 14%. Strong performance from Cambridge Data Centres, which constitutes half of Infratil’s value, underpins expectations for significant EBITDA growth. Gordon also notes Channel Infrastructure (ASX: CHI), a company managing New Zealand’s primary fuel pipeline network, as well-positioned to benefit from higher oil prices due to its defensive earnings profile and ability to pass on inflationary costs.