Daily Brief Financials: AUD, Jingdong Property, Agile Property Holdings, Seazen (Formerly Future Land), Banco Bradesco Sa, Lippo Karawaci and more

• AUD and NZD bear patterns stand out versus the Euro’s rebound which is at the top end of the range as the DXY finds a foothold at 102/101.
• Sterling met our 1.24 rally objective where we reversed to short. USD/JPY rise from 130 reaching for 134. USD/ZAR near our buy zone.
• Yield basing needed to support any sort of meaningful USD rise (DXY 104 near resistance) but there are tradable patterns to work with. USD shows a firmer tone in Asia.

• Just after Alibaba’s big news of a business split and possible fundraising and IPOs for spun-out entities, JD.com announced that they will list its Properties and Industrials businesses in HK.
• The pre-IPO funding round of $800m, led by Hillhouse and Warburg Pincus valued Jingdong Property (JDP HK) at RMB 7.15 per-share, which valued the company at RMB 46.8bn market cap.
• This implies a price-to-book multiple of 1.1x, which is towards the high side considering that the sector is trading at an average discount of roughly 10% to its book value.

Agile Group’s FY 2022 earnings were much poorer than expected, as the company reported a 26% y-o-y revenue decline and abysmal gross margin of just 2% (vs. 23% in H1/22 and 26% in FY 2021). The depressed gross margin reflects the company’s operational challenges, as well as aggressive inventory destocking to prioritise cash-flow generation (which has helped Agile avert a default).

The company’s liquidity position remains precarious, though we do not anticipate a default in FY 2023. This considers management’s high willingness to address debt commitments, as well as the industry’s improved financing environment. At FYE 2022, Agile had a CNY 8.5 bn unrestricted cash balance, which was barely sufficient to cover CNY 3.3 bn of short-term onshore bond/ABS and CNY 4-5 bn of interest expense. The company will have to refinance its bank and syndicated loans, with the government’s recent easing policies being supportive. In addition, we expect Agile to continue deferring new land acquisitions, as it still has a relatively large land bank. Still, the company is likely to continue deferring coupons on its perpetual securities, which are subject to a stoppage of dividend payments.

Seazen Group’s FY 2022 results were in line with expectations, with sustained weakness in contracted sales and revenue, as well as weaker margins. Total revenue declined 31% y-o-y to CNY 116.5 mn, with contractions in GPM and the EBITDA margin.

Key leverage ratios deteriorated over FY 2022, given the decline in revenue and profitability, despite debt reduction. Revenue/Debt weakened slightly to 137%, from 147% as at FYE 2021. Net Debt/Net Inventory was largely unchanged at a sound 19%. That said, Debt/EBITDA weakened to an aggressive 6.9x, due to the lower profitability. Liquidity was inadequate, with cash covering only 70% of ST debt.

• Our focus charts this month are on Brazil banks’ liquidity and capital adequacy trends, which seem reassuring to us, as these are currently topical bank ratios in investors’ minds
• The February NPL trends due to seasonal factors, we are concerned at the pace of NPL ratio worsening and arrears, especially in household credit
• YoY system loan growth to February decelerated further to +12.6%, largely due to slower corporate loan growth; credit spread trends were mixed with individual spreads widening, and corporate spreads eroding

Lippo Karawaci’s (LPKR) FY 2022 results were weak as expected. While the post-pandemic recovery has benefited the company’s malls and hotels, Siloam Hospitals (the largest contributor to revenue and earnings) no longer enjoyed the boost from COVID-19-related procedures. The second-largest segment, Real Estate, was weighed down by a very challenging operating environment, with a sharp increase in mortgage rates impacting demand. The financial risk profile continued to be weak. The only positives are LPKR’s adequate liquidity and the good pro-forma debt maturity profile.