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

Debt Capital Markets

China Water Affairs / Debt Capital Markets

We view CWA as “Medium Risk” on the LARA scale. The Tranfer-Own-Operate business is stable, with steady cash inflows and direct tariff access from end users. Furthermore, receivable days have been relatively low compared to industry peers. However, OCF has been weak in relation to the large upfront capex. There is also a fair amount of business concentration risk as the firm operates within China, specifically in the Southern and Eastern regions. Visibility on the tariff setting framework (cost plus basis) and plans to acquire more water capacity is poor, despite the positive industry dynamics and the government's push to reform the sector. Our credit bias is “Stable” owing to CWA's leading position within the water supply business in China. Furthermore, the TOO model lends itself to a stable, utilities type of cash flows. In addition, CWA collects tariffs upfront from end users in cash, which improves working capital cycle. That said, the business is upfront capital intensive and we expect borrowings to rise in tandem with capex increase, to expand the business. Liquidity is poor due to CWA's borrowings being primarily amortising loans. In our view, the ratings provided by the agencies are fair, while noting that the covenant package is weak. We view the company as “Weak” on the LAGA scale, considering: [1] the controlling shareholder and Chairman Duan Chuan Liang’s government ties may imply potential political risk; [2] track record of the Chairman’s other businesses; and [3] listing regulatory breach in 2007. We take comfort in the fact that the board members are experienced, with a listing track record since 2003 and limited related party transactions. In addition, the presence of several large external investors such as Orix Corporation, IFC and ADB provide some checks and balances. We also note the recent appointment of PwC as auditors, replacing BDO.

We view CWA as “Medium Risk” on the LARA scale. The Tranfer-Own-Operate business is stable, with steady cash inflows and direct tariff access from end users. Furthermore, receivable days have been relatively low compared to industry peers. However, OCF has been weak in relation to the large upfront capex. There is also a fair amount of business concentration risk as the firm operates within China, specifically in the Southern and Eastern regions. Visibility on the tariff setting framework (cost plus basis) and plans to acquire more water capacity is poor, despite the positive industry dynamics and the government's push to reform the sector.  Our credit bias is “Stable” owing to CWA's leading position within the water supply business in China. Furthermore, the TOO model lends itself to a stable, utilities type of cash flows. In addition, CWA collects tariffs upfront from end users in cash, which improves working capital cycle. That said, the business is upfront capital intensive and we expect borrowings to rise in tandem with capex increase, to expand the business. Liquidity is poor due to CWA's borrowings being primarily amortising loans. In our view, the ratings provided by the agencies are fair, while noting that the covenant package is weak.  We view the company as “Weak” on the LAGA scale, considering: [1] the controlling shareholder and Chairman Duan Chuan Liang’s government ties may imply potential political risk; [2] track record of the Chairman’s other businesses; and [3] listing regulatory breach in 2007. We take comfort in the fact that the board members are experienced, with a listing track record since 2003 and limited related party transactions. In addition, the presence of several large external investors such as Orix Corporation, IFC and ADB provide some checks and balances. We also note the recent appointment of PwC as auditors, replacing BDO. 

China Water Affairs - New Issue Assessment - Lucror Analytics