Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

Adaro Energy (ADRO) : Strong Fundamentals and Undervalued Against Peers : BUY

United Tractor (UNTR): Fundamentals Priced In - Take Profits

Softening Coal Prices and Improving Demand Will Drive a Better 2017 Outlook for Coal-Fired IPPs.

Thermal Coal Prices Likely Peaked; Expect 6-9% Correction in Prices from Here. Take Profits

Asia ex-Japan Credit - Analyst, Bondcritic

Brayan Lai

Asia ex-Japan Credit - Analyst

Credit

Indika Energy (“Indika” or “the group”) is one of Indonesia’s last surviving legacy coal mining credits which has emerged relatively unscathed after structural changes in fossil fuel markets, shifting mining regime in Indonesia and positioning among different vested interests. Today the group seems to have emerged stronger after a series of capital and liability management exercises, and has embarked on its next growth phase by committing to a larger investment (additional 45%) in its primary coal asset, Kideco Jaya Agung (“Kideco”).Regarding coal, the world’s “dirtiest” natural resource, it should not come as a surprise that there is still plenty of long-term uncertainty in the sector and this has resulted in a global repricing and reallocation of coal mine assets. The main development, in our view, is an increase in awareness of environment, social development and governance (“ESG”), especially in the Western developed economies. This development is, however, offset by increasing coal usage and commissioning of coal-fired power plants in East Asia and Indonesia.The notion of “stranded” coal resources is highly likely should prices never attain its previous peak in the up-cycle. Nonetheless, we believe coal assets in the region will continue to benefit from long-term regional prospects, albeit the ESG costs of mining coal should realistically increase. In the near-to-medium term, we expect coal prices to remain supportive on the back of conservative production and capex planning by coal producers.

Indika Energy (“Indika” or “the group”) is one of Indonesia’s last surviving legacy coal mining credits which has emerged relatively unscathed after structural changes in fossil fuel markets, shifting mining regime in Indonesia and positioning among different vested interests. Today the group seems to have emerged stronger after a series of capital and liability management exercises, and has embarked on its next growth phase by committing to a larger investment (additional 45%) in its primary coal asset, Kideco Jaya Agung (“Kideco”).Regarding coal, the world’s “dirtiest” natural resource, it should not come as a surprise that there is still plenty of long-term uncertainty in the sector and this has resulted in a global repricing and reallocation of coal mine assets. The main development, in our view, is an increase in awareness of environment, social development and governance (“ESG”), especially in the Western developed economies. This development is, however, offset by increasing coal usage and commissioning of coal-fired power plants in East Asia and Indonesia.The notion of “stranded” coal resources is highly likely should prices never attain its previous peak in the up-cycle. Nonetheless, we believe coal assets in the region will continue to benefit from long-term regional prospects, albeit the ESG costs of mining coal should realistically increase. In the near-to-medium term, we expect coal prices to remain supportive on the back of conservative production and capex planning by coal producers.

Indika Energy

Indika Energy: Doubling-Down on Coal