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.

High Yield Experts

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

Credit

We view China South City (CSC) as “High Risk” on the LARA scale given increasing refinancing risk, with significant maturities in the next 12 months. The company's capital-market access is limited, amid the recent volatile market conditions and heightened yields for the existing bonds. We also note the risks associated with: [1] CSC's weak financial risk profile; [2] the inherent volatility associated with commercial developments; and [3] potential regulatory changes, including delays in government-led support for infrastructure projects. The company will be increasingly reliant on asset disposals or shareholder support for future payment, especially as property sales have deteriorated. That said, positives include the: [1] restructuring and introduction of Shenzhen SEZ Construction and Development (SZCDG) as the single largest shareholder following a capital injection in H1/22-23; [2] shift to fast-churn property sales; [3] recurring income from investment properties; [4] above-average, albeit declining, operating margins, thanks to the cheap land bank; and [5] decent geographical diversification in regional centres. Our fundamental Credit Bias on CSC is “Negative”, given the expected slower recovery in contracted sales for 2023. That said, the company should be able to leverage its relationship with SZCDG for more strategic co-operation and improved access to onshore funding, thanks to its quasi-SOE status. We will look to reinstate a "Stable" Credit Bias on evidence of a turnaround in sales. Controversies are "Immaterial". We believe the Chinese property sector has moderate exposure to environmental and social risks. The sector is not energy intensive, but may face social issues related to construction safety and the satisfaction of homebuyers’ requirements. We believe that governance risks are more significant, due to the sector’s generally low transparency and weak internal controls. The ESG Impact on Credit is "Moderately Negative", mainly owing to CSC's corporate governance. We highlight that the extensions sought for two bonds due in 2022, and the subsequent extensions for all offshore bonds in July, indicate increasing governance risks.

  We view China South City (CSC) as “High Risk” on the LARA scale given increasing refinancing risk, with significant maturities in the next 12 months. The company's capital-market access is limited, amid the recent volatile market conditions and heightened yields for the existing bonds. We also note the risks associated with: [1] CSC's weak financial risk profile; [2] the inherent volatility associated with commercial developments; and [3] potential regulatory changes, including delays in government-led support for infrastructure projects. The company will be increasingly reliant on asset disposals or shareholder support for future payment, especially as property sales have deteriorated.   That said, positives include the: [1] restructuring and introduction of Shenzhen SEZ Construction and Development (SZCDG) as the single largest shareholder following a capital injection in H1/22-23; [2] shift to fast-churn property sales; [3] recurring income from investment properties; [4] above-average, albeit declining, operating margins, thanks to the cheap land bank; and [5] decent geographical diversification in regional centres.   Our fundamental Credit Bias on CSC is “Negative”, given the expected slower recovery in contracted sales for 2023. That said, the company should be able to leverage its relationship with SZCDG for more strategic co-operation and improved access to onshore funding, thanks to its quasi-SOE status. We will look to reinstate a "Stable" Credit Bias on evidence of a turnaround in sales.   Controversies are "Immaterial". We believe the Chinese property sector has moderate exposure to environmental and social risks. The sector is not energy intensive, but may face social issues related to construction safety and the satisfaction of homebuyers’ requirements. We believe that governance risks are more significant, due to the sector’s generally low transparency and weak internal controls. The ESG Impact on Credit is "Moderately Negative", mainly owing to CSC's corporate governance. We highlight that the extensions sought for two bonds due in 2022, and the subsequent extensions for all offshore bonds in July, indicate increasing governance risks. 

China South City - Tear Sheet - Lucror Analytics