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

Trung Nguyen

Senior Credit Analyst

Credit

Garuda’s FY 2018 results were weaker than we expected, and also missed guidance. The carrier remains under pressure from fierce competition, which has resulted in lower passenger yields and market share, as well as reduced bargaining power with suppliers and stakeholders, despite its dominant size. The credit also has a very weak financial risk profile, with a leveraged balance sheet and poor liquidity. Garuda is burdened by past transactions (e.g. the mistimed capacity addition in Q1/17). Furthermore, its costs are significantly higher compared to peers, and it has a limited pricing premium over LCCs. While Garuda's business is more diversified (e.g. with MRO and catering arms), the catering and hotel businesses do not yield high returns. It appears that Garuda has yet to find an optimised model for generating group synergies, even as it continues to acquire loss-making airlines. Liquidity remains poor, with a low cash position against large short-term debt. In FY 2019, we expect the picture to be largely similar, with c. 4-5% revenue growth on the back of a continued capacity expansion. Relative to FY 2018, which was quite a bad year, we expect profitability to improve slightly, assuming that there are fewer natural disasters and that macro factors are more favourable (e.g. oil prices and IDR movements).   Our fundamental Credit Bias on Garuda is “Negative”, owing to its operational inefficiency amid intense competition. We expect the credit profile to continue deteriorating. We maintain our "Hold" recommendation on the GARUDA 5.95% 2020 Notes. We believe the Notes offer substantial value despite the aggressive financial risk profile, due to the likelihood of support from the government. That said, the short maturity presents significant refinancing risk, considering the current market environment. Our base case is that the company will be able to refinance the Notes comfortably.

   Garuda’s FY 2018 results were weaker than we expected, and also missed guidance. The carrier remains under pressure from fierce competition, which has resulted in lower passenger yields and market share, as well as reduced bargaining power with suppliers and stakeholders, despite its dominant size. The credit also has a very weak financial risk profile, with a leveraged balance sheet and poor liquidity. Garuda is burdened by past transactions (e.g. the mistimed capacity addition in Q1/17). Furthermore, its costs are significantly higher compared to peers, and it has a limited pricing premium over LCCs. While Garuda's business is more diversified (e.g. with MRO and catering arms), the catering and hotel businesses do not yield high returns. It appears that Garuda has yet to find an optimised model for generating group synergies, even as it continues to acquire loss-making airlines. Liquidity remains poor, with a low cash position against large short-term debt.    In FY 2019, we expect the picture to be largely similar, with c. 4-5% revenue growth on the back of a continued capacity expansion. Relative to FY 2018, which was quite a bad year, we expect profitability to improve slightly, assuming that there are fewer natural disasters and that macro factors are more favourable (e.g. oil prices and IDR movements).      Our fundamental Credit Bias on Garuda is “Negative”, owing to its operational inefficiency amid intense competition. We expect the credit profile to continue deteriorating.    We maintain our "Hold" recommendation on the GARUDA 5.95% 2020 Notes. We believe the Notes offer substantial value despite the aggressive financial risk profile, due to the likelihood of support from the government. That said, the short maturity presents significant refinancing risk, considering the current market environment. Our base case is that the company will be able to refinance the Notes comfortably. 

Garuda - Earnings Flash - FY 2018 Results - Lucror Analytics

Garuda Indonesia (Persero)

Garuda - Earnings Flash - FY 2018 Results - Lucror Analytics