Credit Analyst, Lucror Analytics

Chuanyi Zhou

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

Logan Group’s H1/21 results were in line with our expectations. The growth in contracted sales and revenue was robust, reflecting good sales execution and a satisfactory pace of property delivery. Margins contracted, but remained strong compared to peers. Profitability will likely be sustained as Logan gradually converts its urban redevelopment projects into saleable resources. Although Logan's expansion continued at an aggressive pace, land spending did not exceed the limit (40% of contracted sales) set by the regulator. However, the group may spend the entire 40% of its contracted sales for the full year. Positively, Logan's debt level remained stable in H1/21. Credit metrics broadly improved, except for weaker Debt/EBITDA, as the margin contraction led to lower earnings.

  Logan Group’s H1/21 results were in line with our expectations. The growth in contracted sales and revenue was robust, reflecting good sales execution and a satisfactory pace of property delivery. Margins contracted, but remained strong compared to peers. Profitability will likely be sustained as Logan gradually converts its urban redevelopment projects into saleable resources.   Although Logan's expansion continued at an aggressive pace, land spending did not exceed the limit (40% of contracted sales) set by the regulator. However, the group may spend the entire 40% of its contracted sales for the full year. Positively, Logan's debt level remained stable in H1/21. Credit metrics broadly improved, except for weaker Debt/EBITDA, as the margin contraction led to lower earnings. 

Logan Group - Earnings Flash - H1 FY 2021 Results - Lucror Analytics

Jingrui's H1/21 results were in line with our expectations, despite the weak profitability and higher debt. The increases in contracted sales and revenue were promising. The credit profile remained weak, with slight improvements thanks to strong top-line growth. Positively, liquidity is adequate. The company's maturity profile has been extended. Jingrui maintained decent access to capital, and slowed its pace of expansion in H1/21. However, the company is now in breach of two of the Three Red Lines thresholds, and will need to reduce debt in H2 to meet regulatory requirements. Notably, Jingrui has increased its use of JVs, possibly to scale up. This is indicated by the company's decreasing consolidation ratio. While Jingrui's exposure to JVs remains reasonable, the consolidated co-operation projects are of greater concern, given the possible debt-like arrangements.

  Jingrui's H1/21 results were in line with our expectations, despite the weak profitability and higher debt. The increases in contracted sales and revenue were promising. The credit profile remained weak, with slight improvements thanks to strong top-line growth.   Positively, liquidity is adequate. The company's maturity profile has been extended. Jingrui maintained decent access to capital, and slowed its pace of expansion in H1/21. However, the company is now in breach of two of the Three Red Lines thresholds, and will need to reduce debt in H2 to meet regulatory requirements.   Notably, Jingrui has increased its use of JVs, possibly to scale up. This is indicated by the company's decreasing consolidation ratio. While Jingrui's exposure to JVs remains reasonable, the consolidated co-operation projects are of greater concern, given the possible debt-like arrangements. 

Jingrui - Earnings Flash - H1 FY 2021 Results - Lucror Analytics

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 20 August. The constituent changes will be effective after the close of trading on 3 September.For the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a>, there are 2 inclusions and 2 exclusions.In line with our forecasts, the inclusions are <a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (2618 HK)</a> and <a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a> while the deletions are <a href="https://www.smartkarma.com/entities/shimao-property-holdings-limited" target="_blank" data-smartkarma-citation="entities:8375:1" rel="noopener">Shimao Property Holdings (813 HK)</a> and <a href="https://www.smartkarma.com/entities/anhui-conch-cement-co-ltd" target="_blank" data-smartkarma-citation="entities:159:1" rel="noopener">Anhui Conch Cement (914 HK)</a>. One-way turnover is estimated at 6.82% and will result in a one-way trade of HK$4.84bn. Following an increase in the index shares and no change in the capping factor at the July monthly rebalance, <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>'s weight will be capped at 8% leading to outflows from the stock.There are only 10 trading days to implementation of the changes.<a href="https://www.smartkarma.com/entities/li-ning-co-ltd" target="_blank" data-smartkarma-citation="entities:6047:1" rel="noopener">Li Ning Co Ltd (2331 HK)</a> was a forecast inclusion in the <a href="https://www.smartkarma.com/entities/hang-seng-china-enterprises-index" target="_blank" data-smartkarma-citation="entities:22900:1" rel="noopener">Hang Seng China Enterprises Index (HSCEI INDEX)</a> but was not expected to be included in the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hong Kong Hang Seng Index (HSI INDEX)</a>. Passive trackers across both indices will need to buy over 3 days of ADV on the stock and the stock could open higher on Monday.<a href="https://www.smartkarma.com/entities/jd-logistics" target="_blank" data-smartkarma-citation="entities:31500:1" rel="noopener">JD Logistics (2618 HK)</a> is down 38% from its IPO price and the index inclusion could act as a support in the short term. Short selling commenced a few weeks back and shorts have piled in rapidly.

The Hang Seng Indexes Company Limited (HSIL) announced the results of its review of the Hang Seng Family of Indexes post market close on 20 August. The constituent changes will be effective after the close of trading on 3 September.For the Hang Seng China Enterprises Index (HSCEI INDEX), there are 2 inclusions and 2 exclusions.In line with our forecasts, the inclusions are JD Logistics (2618 HK) and Li Ning Co Ltd (2331 HK) while the deletions are Shimao Property Holdings (813 HK) and Anhui Conch Cement (914 HK). One-way turnover is estimated at 6.82% and will result in a one-way trade of HK$4.84bn. Following an increase in the index shares and no change in the capping factor at the July monthly rebalance, Alibaba Group (9988 HK)'s weight will be capped at 8% leading to outflows from the stock.There are only 10 trading days to implementation of the changes.Li Ning Co Ltd (2331 HK) was a forecast inclusion in the Hang Seng China Enterprises Index (HSCEI INDEX) but was not expected to be included in the Hong Kong Hang Seng Index (HSI INDEX). Passive trackers across both indices will need to buy over 3 days of ADV on the stock and the stock could open higher on Monday.JD Logistics (2618 HK) is down 38% from its IPO price and the index inclusion could act as a support in the short term. Short selling commenced a few weeks back and shorts have piled in rapidly.

HSCEI Index Rebalance: Li Ning's Double Inclusion; Alibaba Capping Leads to High Turnover

Quantitative Analysis

The property sector in China has been in the spotlight over the last few years. Regulators have made various attempts to temper price growth but the silver bullet has been elusive so far.The powers that be realise that the lack of affordable housing is one of the reasons for China's birth rate dropping and there is now a renewed effort to ensure that property prices do not continue to run up. As part of the measures that started with the 'Three Red Lines' almost a year ago, Bloomberg reports that China has halted PE funds from raising money to invest in residential property developments.We take a look at some of the regulatory changes that have been implemented over the last year and see how the companies in the sector are faring. We then look for stocks with similar characteristics but different stock returns over the last year to find trade opportunities.

The property sector in China has been in the spotlight over the last few years. Regulators have made various attempts to temper price growth but the silver bullet has been elusive so far.The powers that be realise that the lack of affordable housing is one of the reasons for China's birth rate dropping and there is now a renewed effort to ensure that property prices do not continue to run up. As part of the measures that started with the 'Three Red Lines' almost a year ago, Bloomberg reports that China has halted PE funds from raising money to invest in residential property developments.We take a look at some of the regulatory changes that have been implemented over the last year and see how the companies in the sector are faring. We then look for stocks with similar characteristics but different stock returns over the last year to find trade opportunities.

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.<ul><li><a href='#lucror-entity-479'>Evergrande Real Estate Group</a></li></ul>

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.Evergrande Real Estate Group

Morning Views Asia: Evergrande Real Estate Group

China

Logan Property Holdings Company Limited is a real estate development company. The Company focuses on residential property projects.

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Logan Property Holdings (3380 HK)

Logan Group - Earnings Flash - H1 FY 2021 Results - Lucror Analytics

Logan Group’s H1/21 results were in line with our expectations. The growth in contracted sales and revenue was robust, reflecting good sales...

Lucror Analytics

Jingrui - Earnings Flash - H1 FY 2021 Results - Lucror Analytics

Jingrui's H1/21 results were in line with our expectations, despite the weak profitability and higher debt. The increases in contracted sales and...

Lucror Analytics

HSCEI Index Rebalance: Li Ning's Double Inclusion; Alibaba Capping Leads to High Turnover

Li Ning and JD Logistics have been added to the HSCEI while Anhui Conch and Shimao Prop have been deleted. Alibaba's weight in the index will be...

Brian Freitas

China Property Sector: Trading Ideas

The China property sector has been in the regulatory crosshairs and new rules continue to be rolled out. We look for trading opportunities in the...

Brian Freitas

Morning Views Asia: Evergrande Real Estate Group

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region,...

Lucror Analytics

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