Credit

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.

• Azure Power Global Ltd

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.

• China Vanke

Vedanta Resources (VRL) has launched a roadshow to market its USD 144A/RegS benchmark-sized notes (likely to be 5NC2 or mainly 5NC2, and/or 7NC3), with a potential total size of USD 1.5 bn. The proceeds will be used to refinance the USD 13.875% 2027 notes (USD 470 mn outstanding) and USD 13.875% 2028 notes (USD 1,008 mn outstanding). VRL has sent a conditional redemption notice to trustees of the 2027 notes and 2028 notes, assuming the proposed notes issuance is successful.​ VRL has concurrently launched a tender offer for the 2027 and 2028 notes. 

We expect the proposed 5NC2 notes to price at c. 10%, and the 7NC3 notes at c. 11%.

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.

• Samvardhana Motherson International Ltd
• West China Cement
• Yuexiu Property

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.

• Greentown China
• Medco Energi

Shui On Land’s (SOL) H1/24 results were weak, as the company reported reduced earnings, higher net debt and weaker leverage. Positively, rental income continued to grow. As a result, recurring operating income from rentals and property management covered 0.9x of interest expense for LTM June (FY 2023: 0.8x). In addition, asset values were stable, with consolidated investment properties covering 1.7x of net debt. We expect cash flows to improve in H2/24, supported by the planned delivery of two projects.  

That said, liquidity is poor. We view negatively management’s cautious tone during the earnings call. Going forward, we believe that SOL could seek to monetise its 100% stake in its property investment and management arm, Shui On Xin Tian Di. In addition, the company may raise fresh funding by further increasing the LTV on its investment property portfolio to the maximum of 45%, albeit this is uncertain (depending on its arrangements with banks). SOL may also carry out more asset sales.

Meanwhile, we believe that the company may be considering potential liability management exercises for the USD bonds in the event it fails to obtain sufficient financing for repayment.

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.

• Meituan
• New World Development
• Nickel Industries

China Vanke’s H1/24 results were weak in our view. Revenue from the core property development business fell meaningfully amid fewer project deliveries. In addition, the 5% gross margin from property development was weaker than that reported by peers, as Vanke likely carried out aggressive discounting to boost sales. Cash flows were weaker than expected, leading to higher net debt and leverage deterioration. Moreover, liquidity was inadequate.

We note negatively that management did not mention its debt reduction plans. Still, we view positively that the company has reiterated its strong commitment to timely repayment of public debts and ensuring no defaults occur. In addition, Vanke’s proportion of offshore debt has decreased, which could enhance the recovery value against offshore assets in the event of a restructuring. We estimate that the company’s offshore assets may cover offshore debt by 0.7x.

We do not expect Vanke to default in FY 2024, as the company is able to obtain onshore loans for refinancing. Going forward, we believe Vanke’s ability to stave off default in FY 2025 may depend on the progress of its asset sales and asset monetisation initiatives.

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.

• Vedanta Resources
• Xiaomi Corp

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.

• China Vanke
• Shui On Land
• SK Hynix
• Yankuang Energy Group

• Enact’s Q2 2024 earnings call highlighted a strong performance amid an evolving economic landscape.
• The company reported an adjusted operating income of $201 million, a 21% sequential increase, and a 13% year over-year rise.
• Adjusted earnings per share stood at $1.27, with a robust 17% adjusted return on equity.

Anton Oilfield’s H1/24 numbers were softer than expected in our view, with profitability growth lagging revenue improvement. Positively, there was a surge in new orders. This is the third consecutive quarter showing a significant rise in new orders. We expect the business’ positive momentum to continue in FY 2024. The large (3x revenue) and growing backlog support revenue visibility. The financial risk profile remains stable.

Health and Happiness International’s (H&H) H1/24 results were in line with expectations. The company reported weaker earnings and margins from its main Baby Nutrition & Care (BNC) business in Mainland China, amid structural industry challenges stemming from low birth rates in the country. That said, the weakness in BNC was partly offset by growth in the Adult Nutrition & Care (ANC) and Pet Nutrition & Care (PNC) segments. We note that ANC is now H&H’s largest revenue contributor, eclipsing BNC’s numbers. Going forward, we expect the company to continue expanding the ANC and PNC segments in Mainland China and beyond, while seeking to contain the revenue decline at BNC and maintain stable margins for the segment.

H&H has reduced inventory days and generated a small working-capital inflow, which led to positive FCF generation and net debt reduction. The company has adequate liquidity, following its successful refinancing activities in July.

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.

• MGM China Holdings
• New World Development
• Nickel Industries
• Tata Steel Thailand

SJM Holdings’ Q2/24 results were soft. The company reported flat GGR q-o-q (outpacing the industry’s slight decline), supported by the continued ramp-up of GLP. This was partly offset by a weaker showing at GL. Positively, the drag from excess staff costs continued to shrink. In addition, management disclosed that SJM’s market share grew further in July and August, which could support continued earnings outperformance in Q3.

That said, there was little net debt reduction and the company’s pace of deleveraging was slower than peers. Still, liquidity remains adequate, and we do not foresee material refinancing risks for the company.

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.

• Anton Oilfield
• Meituan
• Yuexiu Property

China Oil & Gas (COG) has reported reasonable H1/24 results. Gross profit and EBITDA weakened slightly, mainly weighed down by lower earnings from residential connections amid the property market downturn. That said, there was slight earnings growth from the other business segments.

Leverage was broadly stable, supported by reduced capex. Liquidity was adequate, as the company drew down on its new USD 315 mn three-year syndicated loan and repaid the bridging facility. COG’s next meaningful debt maturity is in June 2026 (when the USD 300 mn notes will come due). We believe the company has options to address the bond repayment, considering its steady business operations and stable (albeit moderately weak) financial profile.

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.

• AAC Technologies Holdings
• China Jinmao Holdings
• Greentown China
• JSW Infrastructure
• Citicore Renewable Energy