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

In our view, Indika Energy's 9M/23 results were weaker than expected due to a sharp decline in Kideco's production and sales volume in Q3, lower-than-expected profitability at Kideco (which accounts for 90% of Indika's EBITDA) and negative OCF, which came as a surprise. The balance sheet turned to a net debt position, after a few quarters of net cash. Liquidity remains sound, with a large (albeit fast shrinking) cash position. OCF and FCF were negative, which was surprising as Indika has previously managed to generate positive FCF even when coal prices were lower than current levels. The last time the company generated negative FCF was in 2015, during a major coal downturn. We believe that the negative OCF may be due to the new businesses, which are ramping up. Indika's key business strategy in the medium term is to diversify away from and reduce its reliance on coal-related activities, with the company aiming to derive 50% of its revenue from non-coal sources by 2025. The new businesses include a gold mine, renewable energy solutions (mainly solar power), electric scooters and several digital technology businesses.

  In our view, Indika Energy's 9M/23 results were weaker than expected due to a sharp decline in Kideco's production and sales volume in Q3, lower-than-expected profitability at Kideco (which accounts for 90% of Indika's EBITDA) and negative OCF, which came as a surprise. The balance sheet turned to a net debt position, after a few quarters of net cash. Liquidity remains sound, with a large (albeit fast shrinking) cash position.   OCF and FCF were negative, which was surprising as Indika has previously managed to generate positive FCF even when coal prices were lower than current levels. The last time the company generated negative FCF was in 2015, during a major coal downturn. We believe that the negative OCF may be due to the new businesses, which are ramping up. Indika's key business strategy in the medium term is to diversify away from and reduce its reliance on coal-related activities, with the company aiming to derive 50% of its revenue from non-coal sources by 2025. The new businesses include a gold mine, renewable energy solutions (mainly solar power), electric scooters and several digital technology businesses. 

Indika Energy - Earnings Flash - 9M FY 2023 Results - Lucror Analytics