Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

<p><br>We view MGM China as "Medium Risk" on the LARA scale. The company holds a gaming sub-concession from SJM Holdings and owns two casino assets in Macau. Our view takes into account MGM China's geographical concentration and exposure to Chinese regulatory changes. Over the medium to long term, the Macau gaming industry should benefit from the rising affluence and discretionary income of China's growing middle class. That said, the industry is currently facing challenges from the impact of the COVID-19 pandemic on tourism and consumers' discretionary spending.<br><br>Our fundamental Credit Bias on MGM China is "Negative", on account of the material earnings decline expected in FY 2020. That said, the company has strong liquidity, which should support it through the crisis. MGM China has no debt maturities until 2024. Positively, it has modest capex plans and historically lower dividend payouts compared to peers. <br><br>We view MGM China as "Moderate" on the LAGA scale. Unlike its peers, MGM China is not majority family-owned, as the company is controlled by MGM Resorts (56%) while Pansy Ho holds 22.5%. We note that MGM Resorts is held by a wide variety of institutional investors, which adds an additional layer of governance. Furthermore, we view positively the fact that MGM Resorts is subject to SEC regulations, which are more robust than those of the HKEX.</p>

 We view MGM China as "Medium Risk" on the LARA scale. The company holds a gaming sub-concession from SJM Holdings and owns two casino assets in Macau. Our view takes into account MGM China's geographical concentration and exposure to Chinese regulatory changes. Over the medium to long term, the Macau gaming industry should benefit from the rising affluence and discretionary income of China's growing middle class. That said, the industry is currently facing challenges from the impact of the COVID-19 pandemic on tourism and consumers' discretionary spending.  Our fundamental Credit Bias on MGM China is "Negative", on account of the material earnings decline expected in FY 2020. That said, the company has strong liquidity, which should support it through the crisis. MGM China has no debt maturities until 2024. Positively, it has modest capex plans and historically lower dividend payouts compared to peers.   We view MGM China as "Moderate" on the LAGA scale. Unlike its peers, MGM China is not majority family-owned, as the company is controlled by MGM Resorts (56%) while Pansy Ho holds 22.5%. We note that MGM Resorts is held by a wide variety of institutional investors, which adds an additional layer of governance. Furthermore, we view positively the fact that MGM Resorts is subject to SEC regulations, which are more robust than those of the HKEX.

MGM China - Tear Sheet - Lucror Analytics

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Melco International Development / Event-Driven

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<p>This week in StubWorld ...</p>
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<p>Encouraging data about a potential coronavirus vaccine from <a href="https://www.smartkarma.com/entities/pfizer-inc" target="_blank" data-smartkarma-citation="entities:1131:1" rel="noopener">Pfizer Inc (PFE US)</a> gives a boost to Nevada-gaming stocks, which now trade "rich" to their Macau gaming holdings.</p>
<p>Conversely, <a href="https://www.smartkarma.com/entities/melco-international-development-ltd" target="_blank" data-smartkarma-citation="entities:809:1" rel="noopener">Melco International Development (200 HK)</a> is trading cheap to <a href="https://www.smartkarma.com/entities/melco-crown-entertainme-adr" target="_blank" data-smartkarma-citation="entities:810:1" rel="noopener">Melco Resorts &amp; Entertainment (MLCO US)</a>, as Lawrence Ho continues to add to his holding - plus there are large movements in CCASS.</p>
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<p>Preceding my comments on Melco and <a href="https://www.smartkarma.com/entities/swire-pacific-ltd-cl-a" target="_blank" data-smartkarma-citation="entities:10433:1" rel="noopener">Swire Pacific (A) (19 HK)</a>  are the weekly setup/unwind tables for Asia-Pacific Holdcos.</p>
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<p>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.</p>
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This week in StubWorld ...



Encouraging data about a potential coronavirus vaccine from Pfizer Inc (PFE US) gives a boost to Nevada-gaming stocks, which now trade "rich" to their Macau gaming holdings.
Conversely, Melco International Development (200 HK) is trading cheap to Melco Resorts &amp; Entertainment (MLCO US), as Lawrence Ho continues to add to his holding - plus there are large movements in CCASS.



Preceding my comments on Melco and Swire Pacific (A) (19 HK)  are the weekly setup/unwind tables for Asia-Pacific Holdcos.




These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20%.




StubWorld: A Shot In The Arm For Gaming Stocks

<p><br/> Melco Resorts’ (MLCO) Q3/20 results were slightly above expectations, with improved q-o-q earnings even though the industry was still impacted by COVID-19 related travel restrictions. The company also reported better performance for its Manila and Cyprus assets, which generated slight positive EBITDA during the quarter. Liquidity remains strong, but we caution that the sizeable cash buffer could be drained by the substantial capex plans in FY 2021.<br/><br/> Like its peers, MLCO has raised significant debt and suspended dividend payments to weather the crisis. We will monitor if the gaming companies resume dividend payments too quickly (i.e. before they achieve sustained positive FCF generation), which would delay deleveraging.<br/></p>

  Melco Resorts’ (MLCO) Q3/20 results were slightly above expectations, with improved q-o-q earnings even though the industry was still impacted by COVID-19 related travel restrictions. The company also reported better performance for its Manila and Cyprus assets, which generated slight positive EBITDA during the quarter. Liquidity remains strong, but we caution that the sizeable cash buffer could be drained by the substantial capex plans in FY 2021.   Like its peers, MLCO has raised significant debt and suspended dividend payments to weather the crisis. We will monitor if the gaming companies resume dividend payments too quickly (i.e. before they achieve sustained positive FCF generation), which would delay deleveraging. 

Melco Resorts - Earnings Flash - Q3 FY 2020 Results - Lucror Analytics

<p><br/> In this month’s “In-Focus” section, we provide an update to our 2018 analysis of returns and volatility for unrated Chinese issuers. Since our first report, the number of such issuers has increased notably. At the same time, with the Lucror Chinese Industrial index having run since 1 January 2018, we can now better compare the unrated issuers' performance relative to peers.<br/><br/> The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market. <br/></p>

  In this month’s “In-Focus” section, we provide an update to our 2018 analysis of returns and volatility for unrated Chinese issuers. Since our first report, the number of such issuers has increased notably. At the same time, with the Lucror Chinese Industrial index having run since 1 January 2018, we can now better compare the unrated issuers' performance relative to peers.   The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.  

Asia HY Monthly - Returns And Volatility For Unrated Chinese Issuers (2020) - Lucror Analytics

<p><br/> The Asia HY Trade Book for the month of October includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative value charts and lists of the bonds in the Lucror Asia HY index.<br/></p>

  The Asia HY Trade Book for the month of October includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative value charts and lists of the bonds in the Lucror Asia HY index. 

Asia HY Trade Book - October 2020 - Lucror Analytics

Hong Kong

Melco Resorts & Entertainment Limited develops, owns, and operates casinos. The Company offers casino gaming, restaurants, bars, and resorts facilities. Melco Resorts & Entertainment serves customers in Asia.

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Melco Resorts & Entertainment (MLCO US)

MGM China - Tear Sheet - Lucror Analytics

We view MGM China as "Medium Risk" on the LARA scale. The company holds a gaming sub-concession from SJM Holdings and owns two casino assets in...

Lucror Analytics

StubWorld: A Shot In The Arm For Gaming Stocks

Melco International Development (200 HK) is trading cheap to Melco Resorts & Entertainment (MLCO US), as Lawrence Ho continues to add to his...

David Blennerhassett

Melco Resorts - Earnings Flash - Q3 FY 2020 Results - Lucror Analytics

Melco Resorts’ (MLCO) Q3/20 results were slightly above expectations, with improved q-o-q earnings even though the industry was still impacted by...

Lucror Analytics

Asia HY Monthly - Returns And Volatility For Unrated Chinese Issuers (2020) - Lucror Analytics

In this month’s “In-Focus” section, we provide an update to our 2018 analysis of returns and volatility for unrated Chinese issuers. Since our...

Lucror Analytics

Asia HY Trade Book - October 2020 - Lucror Analytics

The Asia HY Trade Book for the month of October includes a summary of our recommendations, as well as our high-conviction ideas. The report also...

Lucror Analytics

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