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 Medco Energi as "High Risk" on the LARA scale, owing to its limited size, somewhat short 1P and 2P reserve life, appetite for acquisitions, and moderate (albeit improving) leverage. The company has a history of negative FCF generation, due to acquisitions and heavy exploratory capex to increase reserve life. In addition, Medco's earnings are exposed to oil-price volatility, though the risks are mitigated to a degree by its heavy use of fixed-price gas contracts. Positively, production cash costs are low, which reduces the break-even price. The company also appears to have good access to financing from domestic banks, as well as bond and equity markets. Our fundamental Credit Bias on Medco is "Stable". This is due to the continued high oil-price environment, which should support earnings and cash flow. Leverage has improved significantly since FY 2021. That said, we are cautious on the possibility of a substantial increase in the company's capex over the next few years, or another significant debt-funded acquisition that could weaken its financial profile. Over the medium term, the credit profile should remain driven by the development of oil prices. Controversies are "Immaterial". While Medco is in the fossil fuel industry, we note that its O&G business segment is more heavily involved in natural gas, which has a lower carbon footprint than crude oil and coal. We expect gas demand to be well-supported over the next decade in the company’s key markets (Indonesia and Southeast Asia), as the region transitions away from coal. The company is also involved in renewable energy, which accounts for c. 30% of installed capacity for its power business. Overall, we view the ESG Impact on Credit as "Neutral".

  We view Medco Energi as "High Risk" on the LARA scale, owing to its limited size, somewhat short 1P and 2P reserve life, appetite for acquisitions, and moderate (albeit improving) leverage. The company has a history of negative FCF generation, due to acquisitions and heavy exploratory capex to increase reserve life. In addition, Medco's earnings are exposed to oil-price volatility, though the risks are mitigated to a degree by its heavy use of fixed-price gas contracts. Positively, production cash costs are low, which reduces the break-even price. The company also appears to have good access to financing from domestic banks, as well as bond and equity markets.   Our fundamental Credit Bias on Medco is "Stable". This is due to the continued high oil-price environment, which should support earnings and cash flow. Leverage has improved significantly since FY 2021. That said, we are cautious on the possibility of a substantial increase in the company's capex over the next few years, or another significant debt-funded acquisition that could weaken its financial profile. Over the medium term, the credit profile should remain driven by the development of oil prices.   Controversies are "Immaterial". While Medco is in the fossil fuel industry, we note that its O&G business segment is more heavily involved in natural gas, which has a lower carbon footprint than crude oil and coal. We expect gas demand to be well-supported over the next decade in the company’s key markets (Indonesia and Southeast Asia), as the region transitions away from coal. The company is also involved in renewable energy, which accounts for c. 30% of installed capacity for its power business. Overall, we view the ESG Impact on Credit as "Neutral". 

Medco Energi - Tear Sheet - Lucror Analytics