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.

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High Yield Experts

Senior Credit Analyst, Lucror Analytics

Trung Nguyen

Senior Credit Analyst

Credit

Chandra Asri Petrochemical (CAP) released 9M/18 results. The numbers were weaker y-o-y with lower profitability, but this was in line with our expectations. The company's profitability depends on crack spreads, which tend to be negatively correlated to oil prices (which are difficult to forecast). The balance sheet remains robust, with healthy credit metrics and sound liquidity. The petrochemical industry is commoditised and cyclical. Business performance is driven by spreads between naphtha and its products. The spreads are volatile, and a cycle spans 8-10 years as it takes 7-8 years to build a cracker plant. Sensitivity for crack spreads is high. We believe that its strong balance sheet will help CAP to weather industry headwinds as the spreads between naphtha and its products decrease to the long-term average. We expect crack spreads to continue trending lower in 2018, as feedstock costs are correlated to oil prices, which remain well-supported on account of geopolitical uncertainty. In FY 2019, revenues will be supported by the completion of new plants. In early August 2018, CAP announced the completion of its butadiene plant expansion, by which it increased capacity by 37% to 137 ktpa. Construction of the new 400 ktpa polyethylene plant is 50% complete. Ground-breaking took place in February. Our Credit Bias is “Stable”, as the balance sheet’s strength more than offsets the margin pressure (stemming from tightening spreads between naphtha and its products) and large capex plan. We maintain our "Buy" recommendation on the TPIAIJ '24s for investors with a positive outlook on Indonesian systemic risk.

   Chandra Asri Petrochemical (CAP) released 9M/18 results. The numbers were weaker y-o-y with lower profitability, but this was in line with our expectations. The company's profitability depends on crack spreads, which tend to be negatively correlated to oil prices (which are difficult to forecast). The balance sheet remains robust, with healthy credit metrics and sound liquidity. The petrochemical industry is commoditised and cyclical. Business performance is driven by spreads between naphtha and its products. The spreads are volatile, and a cycle spans 8-10 years as it takes 7-8 years to build a cracker plant. Sensitivity for crack spreads is high. We believe that its strong balance sheet will help CAP to weather industry headwinds as the spreads between naphtha and its products decrease to the long-term average.    We expect crack spreads to continue trending lower in 2018, as feedstock costs are correlated to oil prices, which remain well-supported on account of geopolitical uncertainty.    In FY 2019, revenues will be supported by the completion of new plants. In early August 2018, CAP announced the completion of its butadiene plant expansion, by which it increased capacity by 37% to 137 ktpa. Construction of the new 400 ktpa polyethylene plant is 50% complete. Ground-breaking took place in February.    Our Credit Bias is “Stable”, as the balance sheet’s strength more than offsets the margin pressure (stemming from tightening spreads between naphtha and its products) and large capex plan.    We maintain our "Buy" recommendation on the TPIAIJ '24s for investors with a positive outlook on Indonesian systemic risk. 

Chandra Asri - Earnings Flash - 9M FY 2018 Results - Lucror Analytics